Rebalancing the economy required as things start to slow

As we rapidly approach the midpoint of 2016 and data relating to the performance of the UK economy during the first quarter of the year becomes available, we have reached a good time to review the business environment under which we are currently operating.

In what is now a truly global economy, the starting point should always be to look at the external economic influences at work. After a disastrous start to the year for stock exchanges all over the world, some degree of normality has now returned to the markets. Oil prices have stabilised and the new norm of slower Chinese growth appears to have been accepted.

The United States and United Kingdom have seen relatively strong growth over the past few years. The UK recovered to its 2008 pre-crisis peak during the early months of 2012, despite the ongoing struggle rebalancing the economy. On the other-hand the Eurozone economies have seen a much slower recovery, but recent data suggests things might be changing. The USA and UK showed slower growth during the first three months of the year but the Eurozone finally responded to monetary initiatives taken by the European Central Bank. Growth accelerated such that after eight years it has now recovered the ground lost in 2008. So long as at least one of the larger economic blocks can grow reasonably strongly, a worldwide recession should be avoided.

So far as matters closer to home are concerned, the UK economy has always been heavily dependent on consumer spending and the service sector as engines for economic growth; they are inter-related and any slowdown in spending by the public will have a fairly immediate effect on the rate of UK economic growth. Q1 showed that such a slow-down was underway, poor retail sales figures evidenced by profit warnings from some of the big high street shops told their own story. Other statistics showed that one of the main drivers for consumer spending over the past couple of years has been a decline in the amount of money we are all saving. There is only so long that such a trend can continue and it could well be that we have reached a point where there is no significant increase in the money available for us to spend.

In the aftermath of the financial crisis of 2008/2009, there was much talk about the need for rebalancing the economy so that manufacturing, construction and production made a greater contribution to our economy. Regrettably this objective has so far eluded us. Whilst the service sector is now about13% larger than it was in 2008, the other three sectors are still someway short of where they were before the crisis.

In the short-term we should expect that uncertainty relating to the outcome of the EU referendum will delay some investment decisions, and as such the Q2 figures (to be released in July) might show a sharp fall in economic growth. However it should perhaps be noted that this does not appear to have been a significant factor within data released for the first three months of the year.

Andy Milson, Head of Partner Training & Development at BNP Paribas Leasing Solutions

Andy is an experienced sales and finance professional with over 25 years’ experience in sales aid leasing. Andy is widely recognised as an expert in business finance and has in recent years focused his attention on developing partner sales teams develop an understanding of how businesses secure project financing. His training programme  – Finance Unlocked – is a highly rated customisable course and is offered at no cost to partners.

If you’re interested in helping your sales team overcome finance-related hurdles during the selling cycle, please get in touch with Andy on
07966 114 243 or email here.