The OECD forecast of a recession in the UK in the second half of the year came as a shock, and not just because this was a worse prospect that for any of the G7 and vastly worse that the Treasury forecast. It was a shock because it was much worse than any previous official forecast, including that of the Bank of England, and worse than almost all of the private sector ones too.
The OECD is excellent and Jorgen Elmeskov, who is in charge of these forecasts, is very level-headed and sensible. But while of course this may well turn out to be right, my instinct is that it is too gloomy.
The main reason for thinking that is the resilience of the UK consumer and it was interesting to see that today's service sector numbers were quite strong. I still think the big problem year for the UK economy will be next year, not this. I'll address all this in more detail in tomorrow's Independent.
But right or wrong, the forecast gives a chill background to the pre-budget report due out next month. The fiscal deficit looks like heading way beyond £50 billion next year and it is hard to see what the Chancellor can do about this. I suspect that it was this sense of impending gloom that propelled Mr Darling into that bizarre interview last weekend: he may even have had the OECD forecast in his in-box and wanted to make it clear that he was not to blame for the mess he inherited from the previous incumbent.
But france and germany are allready in recession it does not make sense, The USA is just doing well because the president has put off the recession for the election there economy of the USA will hit skid row by the next year too I am better than the OECD. (big rasberry to OECD)
Posted by: Berty | Wednesday, 03 September 2008 at 09:29 PM
The OECD is almost certainly correct in forecasting the UK faces a worse downturn than most of the other major economies.
From Thatcher onwards, our economy has been managed to fit fanciful economic theories; write off shipbuilding, (has anyone noticed all the huge cruise liners built in Europe over the last 20 years), let the Merchant Navy cease to exist,sell North Sea Oil and Gas as fast as possible, sell the national energy infrastructure, distribute the proceeds as tax cuts, let free markets rip, never mind the absurd cost of housing, deregulate the financial sector, let it invent new financial instruments that have no ties to sound assets, encourage Building Societies to become banks, let banks make exotic investments in futures, hedge funds and the like, let British farming and manufacture decline further if today we can purchase cheaper elsewhere, ignore the horrendous balance of payments problem, the pound will be strong, we are going global, the City of London leads the world.....
...... to a cliff edge. Our smug politicians, economists and business leaders have criticised France, Germany and others for being slow to follow their clever lead. Paris and Berlin will be thankful they were never enthusiastic about the British economic mirage.
Expensive oil, and the credit crunch have just shoved the British economy over the edge, and we are discovering there is there is no parachute. Nor can we yet see how far away is the ground.
Changing a Labour government for a Conservative government is not going to moderate the impact, and who would trust either of them to ever lead us again ?
To manage the crash we are going to need a coalition under a convincing leader not tainted by these past failures of Labour and Conservative economics. Paddy Ashdown as Prime Minister springs to mind, with Vince Cable as his Chancellor.
Of course I could be wrong about all this. Do you feel that lucky ?
Posted by: Roger Sibley | Thursday, 04 September 2008 at 03:09 PM