What does the UK economy look like in 2012?

I was fortunate to attend a very interesting Bank of England (BOE) update presentation by the BOE South East Agency in mid-January. For reference, there are 12 regional agencies across the UK. Their purpose, amongst others, is to consult, share and interact with business across the UK as a barometer of views and economic conditions to feed back to the Monetary Policy Committee (MPC).

Further details can be found here: http://www.bankofengland.co.uk/publications/agentssummary/index.htm

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The update and presentation revealed and consider many economic expectations forecast over the next 12 months. Please bear in mind that forecasts are just that, forecasts, and should not be seen as anything else. I have listed these below:

• Inflation will continue to fall with the potential of reaching and falling below the MPC’s inflation target of 2.0% by the end of 2012.
• Growth was largely flat in the last 6 months of 2011 and is expected to be the same in the first 6 months of 2012.
• GDP growth subdued with the expectation that this will start to move positively at the end of 2012.
• Base rates are expected to remain unchanged until the end of 2013, unless anything significant occurs.
  
• Further Quantative Easing (QE) is expected in 2012, where needed.
• Unemployment has reached about 8%, with public sector jobs falling and private sector roles increasing. Both are expected to level off although the fears for higher unemployment remain.
• Consumer consumption has fallen and is expected to fall further.
• Business lending still falling and likely to continue.
• No expectation of recession, as long as there is no further shocks.

This is not an exhaustive list, but certainly provides a flavour of the expectations for the UK economy over the next 12 months.

This blog is for information only and should not be seen or used as individual advice. Seek independent financial advice (IFA) for your own circumstances.

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Keith Churchouse FPFS
Director of Chapters Financial Limited, Guildford, Surrey

Chartered Financial Planner
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