UK economy won't grow for three years, says behavioural economist
The UK economy will remain flat for at least three more years, until banks re-engineer their businesses to be able to lend again.
That's according to a forecast made by behavioural economist Roger Martin-Fagg at last night's networking event by contract caterer Bartlett Mitchell, entitled Making Sense of the Economy for the Catering Industry.
Martin-Fagg said that the UK remains in a period of austerity but dismissed the idea that it is part of a regular economic cycle, instead describing it as a "discontinuity".
He said: "They take place every two generations and the last was around 1930.When they happen, people rewrite the rule book and find different ways to create value.
"Though it's a paradox, a long period of growth now sows the seeds for innovation and growth in five years' time."
He went on to tell the group of Bartlett Mitchell clients and suppliers assembled for the event at Mcgraw-Hill in Canary Wharf of the implications of the Sterling's recent weakening against the Euro and the Dollar.
"This will not give us the growth kick as many would think. Most of our exports to the world are comparatively price insensitive," he explained. "They are service, quality and delivery sensitive, but not price.
"What devaluation does is improve the profit margin of the exporter but on the other side of the coin, it substantially increases the cost of imported commodities, like food and energy."
Martin-Fagg said it will increase the UK inflation rate by around 1%, which means that inflation will be 3% compared to people's earnings growing by about 1.5%.
"When our incomes contract people become more value conscious rather than price conscious. People buy less frequently but they buy better.
"The only thing we can do is work smarter and in different ways to create more value with the same or less input costs."
Wendy Bartlett, chief executive of Bartlett Mitchell, commented: "Roger's explanations and predictions about the economic climate in the UK made a lot of sense.