Collaboration Forum Series 5: Building a brighter future (Week-7) | Protiviti United Kingdom

Collaboration Forum Series 5 Building a brighter future (Week-7)

The future of the economy post-COVID-19: what’s next for consumers, workers and businesses?

What does our post-pandemic future look like? Who are most likely to be the winners and the losers in the months and years to come? Has the economic damage caused by the pandemic caused irreversible damage or created a once-in-a-generation opportunity to transform our economy and society and keep the UK globally competitive? Dr John Ashcroft joined our forum to make sense of recent economic and financial market data and debate the UK strategic options for post-pandemic economic and societal success.

Topics

Board Matters Risk Management and Regulatory Compliance Business Performance Digital Transformation

Meet Our Inspiring Speaker

Dr John Ashcroft, The Saturday Economist

Economics, Strategy, Financial Markets, NED, Consultant, Advisor and Chair... . John makes sense of recent UK data and financial markets in strange, turbulent times. He also works with companies to develop strategies for success in the age of rapid change. John also produces "The Saturday Economist" weekly newsletter and also "The Saturday Economist Live", a monthly round-up live on Zoom.

A booming return to normal – why 15 per cent growth in three years will happen

John Ashcroft from The Saturday Economist believes the UK is heading for a post-pandemic boom. He set out his vision for the economy, on Protiviti’s Collaboration Forum at the beginning of June, before taking quick-fire questions from the audience.

First comes the recovery…

John Ashcroft arrived in buoyant mood on Protiviti’s Collaboration Forum in June. The economist, who shared his last update at the event in March, delivered another positive message: UK Gross Domestic Product (GDP) will rise by 7.25 per cent in 2021, followed by 5.75 per cent next year, and 1.25 per cent in 2023.

Growth of 15 per cent in three years is good economic news; he even called it a “boom”.

This recovery will be driven by investment, from the public and private sector; construction and manufacturing; and retail, hospitality and leisure, slowly returning. There is, as we know, a focus on environmental and social governance, which will also stimulate companies focused on carbon capture and new forms of energy. But a lot of it will come from an economy getting back on its feet and people spending money again.

There are some big trends happening in the background, which will continue to challenge businesses, though: the ‘collapse’ of high street retail brands and their movement online is part of ‘digital acceleration’ in the economy. The same is happening in the workplace, with companies operating virtually, and questions about how commercial property will adapt in the future.

In addition, John said the country was entering a ‘new trade era’ as it navigates agreements with the rest of the world, which will take time. And all of this is happening when companies are still dealing with knock-on effects of the pandemic.

Booms are often followed by busts. What do you see happening four to five years into the future?

Let’s put the boom in perspective: it’s like returning to normal. It’s a bit like a bath or a reservoir that’s been drained of water and suddenly it’s got a chance to fill up quickly. So, we’re going to return to where we were, by the middle of 2022.

We’re looking for a return to trend growth, of 1.8 to 2 per cent, after the next couple of years have been worked through. There’s no overheating of the economy because it’s a question of catching up.

What do you think will happen to inflation?

Inflation is largely determined by what’s happening to oil prices. If we look at the US at 4.2 per cent, and the UK coming back to 1.5 per cent, one of the big drivers has been oil. Oil is now trading near $70 a barrel. In April last year, it was trading at $18 to $20 a barrel.

We’ve also seen a big squeeze on commodity prices and suppliers have been caught unaware. But central bankers think this surge in pricing is going to work itself out quickly. Our model suggests that inflation could go up to 3 per cent, maybe more within the next couple of months, but it should ease back after that.

The big fear is a wage spiral. With a tightening labour market, there could be wage inflation. In accommodation and food businesses, for example, there may be a struggle to recruit the people needed to get plates on the tables.

Is there a way back to running the economy as a household budget, or are we stuck with this huge national debt?

Here’s the twist: when you look at government debt, the debt is a liability owned by the Treasury, but the asset is one owned by the Bank of England. The good news is that the Treasury and the Bank of England are owned by government. With a bit of subtle interbank adjustment, a big chunk of that debt just disappears. Nobody is talking about that yet, but it is a reality. Don’t worry about the debt because we’re not paying interest on it and a lot of it could just be forgiven with a bit of adjustment.

Is GDP still the best single measure of the UK as a country?

It’s not the number, but it is one of the big numbers we look at to measure the performance of the economy.

There are issues that should be raised about health and wellbeing and one of those is child poverty. The child poverty index can be used as a performance indicator for economies around the world. In the UK, addressing child poverty could help the levelling up agenda, and that would be a dramatic thing to see.

What does the UK need to do to mirror the growth rates of China, for example?

You’ve got to remember that China is currently the second largest economy in the world, but it would still struggle to get into the top 50 in the world, in terms of GDP per capita. China has still got a long way to go to catch up the UK.

We’ll be happy to get growth back to 2 per cent. Seven per cent this year, and over 5 per cent next year is going to give the UK a real boost, which will support a lot of businesses in the UK moving forward.

John Ashcroft was speaking on Protiviti’s weekly Collaboration Forum, which is now in its fifth series. John is also writing guest blogs for Protiviti and this month he looks at topic of inflation, which can be found here.

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