What’s Next… for business in 2011?

17.11.2010

In our 'What’s Next…?' event we looked at the prospects for business in 2011

The UK economy has been through a turbulent year and now faces an uncertain 2011, not least because £81bn in public spending cuts will start to bite. At our event on Tuesday 16 November, a panel of expert speakers gave their insights and predictions on the prospects for business in the next 12 months.

The speakers were:

- Jonathan Loynes, chief european economist, Capital Economics
- Ian King, deputy business editor, The Times
- Peter York, consultant, author and broadcaster

The key points were:

- We should watch for the Bank of England increasing interest rates, which could trigger a double dip recession
- Private sector employment could flourish, but smaller businesses will be looking for easier access to credit
- Mobile telephony, hardware and digital content providers are likely to grow next year
- British brands and creative industries need to better define themselves to make the most of global markets

What's next... For business in 2011 from Fishburn Hedges on Vimeo.

The UK economic squeeze

- The UK economy is recovering – but the spending squeeze combined with any hike in interest rates could trigger a double-dip recession.

- There is good reason to think that over time the private sector can reasonably fill the employment holes left by public sector redundancies, and the private sector may flourish by not competing for talent with the state. While 500,000 public sector jobs may disappear over the next few years, in the last year alone the private sector has created 250,000 new ones.

- Meanwhile, the challenge for small businesses (accounting for 53% of the workforce) will be that credit is not flowing from the banks. While the banks may argue that their lack of lending is demand led, it could equally reflect the terms on which loans are available.

- UK growth sectors to watch in 2011 include mobile telephony (O2 and Vodafone in particular), electronic chip designers and digital content providers

- The banking sector faces significant challenges, not least in preparing for the Basel III regulations when they come into force in 2019. Those liquidity requirements may much sooner start to squeeze bank lending for those that need to shrink their balance sheet if they struggle to raise money on the markets

- Retailers face a mixed year. Sainsbury’s growth figures were actually rather flat but Tesco is still growing at a phenomenal rate, in the six months to the end of the year opening floor space equal to 15% of Morrison’s total floor space

Euro threat

- The Eurozone project is at risk. The current crisis engulfing Ireland could see it, along with other peripheral economies, leave the Euro. If Ireland defaults or restructures in a disorderly way, the contagion could spread.

- There is a more than even chance that the single currency will change significantly in the next five years, either with smaller economies pulling out or much more dramatic threats to the existence of the Eurozone.

The UK’s place in the world

- China will continue to grow at a strong pace of around 10% and there are no immediate signs of its economy overheating. The challenge for the UK is to increase its exports to China (and other BRICs and emerging markets such as South Korea and Indonesia) to reduce its reliance on European exports

- To do this, UK brands need to make clear what they stand for. They are currently failing to make a significant impact on global markets, possibly with the exception of the Premier League.

- The question for many UK brands in many overseas markets is not so much “what do they think of us?” as “do they think of us?” Many don’t, not least because many British brands are too self-indulgent to mean enough for other markets to invest in.

- As far as the impact of the US, the ‘dead-star effect’ can be seen in action, where an empire in decline still projects its cultural influence up to 100 years after its eclipse. It is 100 years since the UK was at its peak!