Britain set to thrive in next economic 'golden age'

Britain set to thrive in next economic 'golden age'

The British economy is poised to emerge from recession in prime position to take advantage of the new global economy, economist and commentator Dr Linda Yueh told the Ace Columbus Day.

Delivering a notably upbeat assessment of the prospects for the British economy, Yueh said it is well placed to benefit from the huge potential in emerging economies and the next “golden age” for the global economy.

She said never before in history have there been countries, like Indonesia, with such massive populations entering the middle classes creating demand for goods and services.

And while this represents potentially more competition to advanced economies, Britain’s openness to business and its expertise in delivering quality services means it is also a significant opportunity this country should seize on.

“Britain is in the best position to benefit from this global change. It has always punched above its weight. If Britain thinks differently the outlook is actually very bright in coming years,” Yueh said.

However, Yueh warned there were still some major short-term difficulties the British economy is likely to face, not least surrounding the uncertainty over the Eurozone.  

And the economy is currently going through a fragile ‘zig zag’ recovery meaning any future economic crises could cause a further downturn and another return recession, growth having returned.

After the boost of the London Olympics the British economy is likely to emerge out of its double dip recession, but could suffer a triple dip due a post-Games lull, Yueh said.

“This is something that the West has to get used to,” she said. “When you have a period of growth after a banking crisis it tends to be slow and it can be stopped entirely by other factors.

“It [the recovery] is so fragile anything could tip is back in to something like we saw in 2008.”

Yueh said that while the recession has been deep in the advanced economies emerging economies with large domestic markets due the emergence of middle classes have been largely unscathed.

Some of the worst downturn has been seen in smaller emerging countries lacking in domestic demand like Latvia, which has seen a 25% fall in output.

“If you have a domestic middle class market that’s what allows these countries to be able to sustain growth. After 20 years of playing catch up they now have that middle class to cope with a downturn.

“Those very same middle classes can also provide a source of demand for the rest of the world.”

Debt remains the biggest issue for many counties in Europe, added Yueh, with Britain suffering from the continent’s third highest budget deficit.

This is exacerbated by high levels of unemployment, although the puzzle for many economists is why unemployment in the UK has not risen as much as expected.

In the Eurozone the biggest issue is confidence meaning investment is being held back, although Britain has benefitted from being outside and seen as a safe haven for capital.

“What’s less certain in terms of the Eurozone area is what it’s going to look like in 10 years time. One of the key questions for this country is what is going to be on our doorstep,” said Yueh.

“The question for Europe is does it need a single currency to benefit from a single market.

Yueh added: “Increased competitiveness from other countries in challenging but it is good for the west, it’s just what the west needs. 

“If you are worried about your future you need to up your game, you need to know that there is competition coming from emerging markets.

“You are going to be spurred on by these countries that are hungry and coming through the ranks.”

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