BUSINESS consultancy the Centre for Economics and Business Research has released predictions for 2009.
As the UK enters ‘the most difficult year… since the 2nd World War’, car dealers will find the report makes gloomy reading. However, it is still a vital series of predictions.
By being prepared for what lies ahead, smart-thinking dealers will be able to position their business in the best possible way to survive the financial crisis. Here’s what the cebr predicts for 2009, as the recession deepens…
1. Economy’s 1st full year contraction since 1991
With bank lending running at a trickle, expect a 2.9 per cent fall in economic activity in 2009 – the steepest single year drop since 1946.
2. Business failures up 50 per cent
In the toughest economic climate in decades and with bank credit at a premium, research by cebr shows that business failures will rise by 50 per cent in 2009, with at least 32,300 firms going bust.
3. Unemployment to reach highest point since 1996
The wider measure of unemployment is likely to approach 2.8 million within 12 months. A recent survey showed that just 9 per cent of firms found availability of staff a greater challenge to business performance, compared with 23 per cent in 2007. Labour shortages have disappeared.
4. Inflation will turn negative
Inflation is collapsing due to declining commodity prices, heavy retailer discounting and the effect of the VAT cut. Consumer price inflation will briefly turn negative in summer 2009.
5. Interest rates will hit 0.5 per cent
The monetary policy committee will cut rates as they attempt to ward off the real risks of deflation and deep recession: interest rates will hit 0.5 per cent before the summer, and stay there for the rest of the year. This is the lowest since the Bank of England was founded in 1694.
6. Sterling to fall below Euro
Sterling will tumble as the Bank of England cuts rates faster and more deeply than the European Central Bank. It is currently 30 per cent down from its average level in 2007.
7. Migrant workers will leave UK
Latest data shows a 36 per cent year-on-year fall in applicants to work in the UK. This trend will continue into 2009; we could see the number of overseas workers registering fall by 50 per cent. We could even see 0 or negative net migration for the first time since 1993.
8. Government borrowing to increase again
With the government forecast for economic growth in 2009 on the optimistic side – and a remarkable bounce back predicted in 2010 – Chancellor Darling is likely to raise his borrowing forecasts once again in the March Budget.
9. Barack Obama enters office…
… As the United States enters its most serious recession since the 1980s, if not the 1930s. The cebr forecast is for a full year contraction in the range 1.0-1.5, while the US unemployment rate will rise from its current 6.7 per cent to 8.5 per cent, the highest since 1983. We are likely to see a period of negative consumer price inflation, the Fed target rate staying at 0-0.25 per cent.
10. Manchester United will win the Premiership title
The cebr central forecast was for Liverpool to win the Premiership title for the first time since 1990. This view, however, was taken before their captain and spearhead was arrested… we are now backing Sir Alex’s men to storm through the 2nd half of the season and take the title.
