United Kingdom Business Forecast Report Q4
2012

United Kingdom Business Forecast Report Q4 2012

Core Views The economy is recovering, but with fiscal cuts looming and unemployment stubbornly high, the rate of growth will be fairly tepid.

Given the marked slowdown in domestic and global economic activity, we now expect the Bank of England to hold the bank rate at 0.50% through to end-2013, with scope for further additions to the asset purchase programme.

Despite numerous ructions between the ruling Conservatives and Liberal Democrats, we expect the coalition government to hold firm through to the next parliamentary election in 2015.

Major Forecast Changes There are no major forecast changes this quarter.

Key Risks To Outlook Downside Risks To Medium-Term Growth: There are significant downside risks to our economic growth forecasts, particularly stemming from the impact of fiscal consolidation and the eurozone sovereign debt crisis.

Upside Risks To Inflation: Should the pound remain broadly weak and global commodity prices edge higher, we would warn of upside risks to our inflation forecasts.

• Executive Summary
  • Core Views
  • Major Forecast Changes
  • Key Risks To Outlook
• Chapter 1: Political Outlook
  • SWOT Analysis
  • BMI Political Risk Ratings
  • Domestic Politics
  • Coalition Risks Losing Direction Amid Mid-Term Malaise
  • While the UK's coalition government has not enjoyed the overwhelming mandate which New Labour secured back in 1997, it has
  • hitherto been able to rely on support for fiscal austerity and the public backlash against the previous incumbent. However, the
  • government has recently suffered a number of embarrassing post-budget U-turns and could be losing the debate on austerity versus
  • growth. This has propelled the opposition Labour party back into the lead in the polls and has raised the hurdle for the governing parties
  • ahead of the 2015 election
    • TABLE: POLITICAL OVERVIEW
    • TABLE: UK POLITICS KEY PLAYERS
  • Long-Term Political Outlook
  • The Road To 2015
  • Despite just a year and a half since the last parliamentary election, the UK's main political parties are already gearing up for the next
  • ballot in 2015. For the ruling Conservatives the election will hinge on the state of the economy and success of its proposed fiscal
• Chapter 2: Economic Outlook
  • SWOT Analysis
  • BMI Economic Risk Ratings
  • Economic Activity I
  • Economic Recovery: Down But Not Out
  • The UK economy has been hit hard by the escalating eurozone sovereign debt crisis and will continue to face strong headwinds through
  • the remainder of the year. However, we view continued growth in service sector output and employment as positive signals which
  • suggest that our 2012 real GDP growth forecast of 0.6% is still in play
    • TABLE: ECONOMIC ACTIVITY
  • Weak Productivity Risks Locking In Low Growth
  • The UK labour market has proven remarkably resilient during and after the 2008-2009 recession, faring significantly better than the
  • eurozone. However, rising employment alongside a stagnant economy is synonymous with falling productivity. We warn that there is a
  • risk of lower productivity becoming locked in ahead of the recovery, in turn lowering the UK's longer term growth potential
  • Monetary Policy
  • BoE Turning On The Monetary Spigots Once More
  • The Bank of England (BoE) has upped the ante once again and opted for a further expansion of its asset purchase programme. In light
  • of strong global economic headwinds, we believe that the GBP50bn in additional purchases announced on July 5 will likely be followed
  • by a further extension of the programme this year
    • TABLE: MONETARY POLICY
  • Exchange Rate Policy
  • Pound Anchored Despite Euro Turmoil
  • Despite the escalating eurozone sovereign debt crisis that has rocked equity markets, the British pound has proven remarkably stable in
  • recent months
  • Banking Sector
  • Headline Banking Sector: Another Scandal Dents The City
  • The LIBOR fixing scandal has dealt another blow to the already tarnished reputation of UK banks. A more thorough investigation could
  • implicate more financial institutions and turn into a protracted affair
    • TABLE: EXCHANGE RATE
• Chapter 3: 10-Year Forecast
  • The UK Economy To 2021
  • UK Will Outperform Eurozone Over The Long Term
  • Despite the current economic stagnation in the UK, we hold to a more upbeat assessment over the longer term and expect growth to
  • outperform the eurozone
    • TABLE: LONG-TERM MACROECONOMIC FORECASTS
• Chapter 4: Business Environment
  • SWOT Analysis
  • BMI Business Environment Risk Ratings
  • Business Environment Outlook
    • TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
    • TABLE: BMI LEGAL FRAMEWORK RATING
    • TABLE: LABOUR FORCE QUALITY
    • TABLE: TRADE AND INVESTMENT RATINGS
    • TABLE: TOP EXPORT DESTINATIONS
• Chapter 5: Key Sectors
  • TABLE: TELECOMS SECTOR - FIXED-LINE - HISTORICAL DATA & FORECASTS, 2009-2016
  • TABLE: TELECOMS SECTOR - INTERNET - HISTORICAL DATA & FORECASTS, 2009-2016
  • TABLE: INDUSTRY TRENDS - MOBILE SECTOR, 2009-2016
  • TABLE: INDUSTRY TRENDS - MOBILE ARPU SECTOR, 2009-2016
• Market Overview
  • TABLE: UNITED KINGDOM - PETROCHEMICALS SECTOR, 2008-2016
• Other Key Sectors
  • TABLE: AUTOS SECTOR KEY INDICATORS
  • TABLE: OIL AND GAS SECTOR KEY INDICATORS
  • TABLE: DEFENCE AND SECURITY SECTOR KEY INDICATORS
  • TABLE: FOOD AND DRINK SECTOR KEY INDICATORS
  • TABLE: INFRASTRUCTURE SECTOR KEY INDICATORS
  • TABLE: PHARMA SECTOR KEY INDICATORS
  • TABLE: FREIGHT KEY INDICATORS
• Chapter 6: BMI Global Assumptions
  • Global Outlook
  • The Cycle Has Turned
    • TABLE: GLOBAL ASSUMPTIONS
    • TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST
    • TABLE: REAL GDP GROWTH CONSENSUS FORECASTS
    • TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST