DIFFICULT ECONOMIC YEAR AHEAD, BUT IMPORTANT NOT TO EXAGGERATE RISKS - CBI CHIEF IN NEW YEAR MESSAGE
2008 will be a "difficult year" for the British economy, but it is important not to exaggerate the risks and talk ourselves into a more serious downturn, the CBI's Director-General said today (Tuesday 1st Jan) in a New Year message on the CBI website.
The most likely outcome is a "soft landing" as the economy slows, Richard Lambert said, despite the uncertain times ahead and with the UK exposed to twin shocks from rising commodity prices and the continuing credit crunch.
And he listed five reasons for feeling more cheerful about the future - including the equity that many households have got locked away in their homes. Around 60 per cent of mortgage borrowers have more than £100,000 of equity in their homes, compared to less than 10 per cent in 1993. That gives them "a comfortable cushion to fall back on if times get tough", he argued. Another plus point is that the Bank of England has been "doing a good job of managing inflation expectations".
In his message, the head of the country's biggest business group says that "we may be entering a new phase" in the structure of the global economy, with a "bumpier ride in the years to come" a real possibility. He reflects that "the global economic balance of power is shifting East" to China and India, who have driven growth as the US economy has slowed, and that alongside this "we appear to have moved into an era of high energy prices, and one where investment decisions will be dictated in part by the price of carbon".
To succeed in this new world, the UK needs to focus on the "absolute necessity of raising the national skills and knowledge base at every level", on strengthening its flexible labour market and on developing its transport and power infrastructure, Mr Lambert said. It must also secure a competitive tax and regulatory regime, fight the growth of protectionism in the developed world, and put in the "major effort" required to take on climate change.
1 January, 2008
Notes to Editors:1. Richard Lambert's New Year message can be found at www.cbi.org.uk/nymessage
2. Media are welcome to reproduce the message in part or in full, and to link to it at the web address above.
3. The CBI is the UK's leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. The organisation is also the UK's official business representative in the European Union, which generates more than 50 per cent of regulation affecting British firms. With offices across the UK as well as in London, Brussels, Washington and Beijing, the CBI coordinates British business representation around the world.
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