The UK Economy: Present and Future

The UK Economy: Present and Future
May 29, 2017 Mark Richards

The UK Economy

There has been good and bad news for the UK economy this month – but as the politicians concentrate on the here and now, we take a look into the future…

We have mentioned the problems of the UK retail sector several times on this blog. Competition from the internet, town centre premises versus out-of-town warehouses, business rates going up and – over in America – legendary investor Warren Buffet prophesying the ‘death of retail.’

Well, it seems like we were all wrong: because in April the sun came out and retail sales rebounded. Figures from the Office for National Statistics showed that sales for April were 2.3% higher than in March and 4% up on the same period last year. “Anecdotal evidence from retailers suggested that good weather contributed to the growth,” said the ONS.

The stronger-than-expected figures pushed the pound up to $1.30 – its highest level since September last year – and led experts to say that fears of a post-Brexit slowdown could be dismissed.

But just when it was all going so well up popped Marks and Spencer, long seen as the traditional bellwether of the British high street. Full-year profits fell by almost two-thirds last year to £176m following yet another ‘one-off overhaul’ to try and halt a decline in clothing sales. Like-for-like sales in the UK fell by 1.9% and by a worrying 5.9% in the three months to April.

What about the wider economy?

The news was less good for the UK economy as a whole, as UK growth for the first three months of the year was revised down to 0.2% from the original estimate of 0.3%. The ONS blamed rising prices for this, as inflation in the UK jumped to 2.7% in April – the highest level since September 2013. The drop in growth mirrored a fall in growth in the UK service sector, which only managed to grow by 0.2% in the first quarter – sharply down from the 0.8% recorded in the last quarter of 2016.

Bad news for the government

One effect of the reduction in growth for the UK economy was a slowdown in government revenues: there was less money coming in from tax and as result, the government’s borrowing – and the UK deficit – rose. In April the government spent £10.4bn more than it received: £1.2bn more than in April 2016 and the highest comparable borrowing figure since 2014. With Chancellor Philip Hammond trying to balance the books and ultimately bring the deficit down (although George’s Osborne’s plan to eliminate the deficit by 2020 is long gone) this is not the news he would have wanted.

All in all, it was not surprising that the Bank of England cut its growth forecast for this year, now expecting the UK to growth by 1.9% as opposed to the 2% it had earlier forecast. More worrying perhaps was a forecast from the EY Item Club that the UK jobless rate will start to rise next year.

The immediate outlook for the UK economy

Blaming slower growth in jobs, their latest report expects to see unemployment increase from around 4.7% this year to 5.4% in 2018 and 5.8% in 2019.

So what does all this mean for you and me as the General Election approaches? We are now just ten days away from June 8th – and with the gap between the two main parties having narrowed significantly over recent days. Theresa May still looks likely to win her own mandate, but there is now far less talk of a Conservative landslide.

Sadly, it does not matter who is standing outside 10 Downing Street a week on Friday: your taxes are going up. The ever-escalating cost of the NHS, the social care bill, the need to reduce the government deficit, the need to invest in the national infrastructure, the possible bill for Brexit… The list is long and getting longer, and both of the main parties look committed to expanding the role of the state.

The longer term outlook for jobs

The UK Economy: Present and Future

But let us lift our eyes from the immediate future of the UK economy and look further ahead. We wrote on Friday about data, and the steps the EU is taking to control the collection, protection and use of data. There was a quote in the article: ‘data is the new oil.’ The reason data will be so important in the future is that it will drive artificial intelligence, which – along with robotics – is going to play a hugely important part in all our futures. Ultimately, it is going to be much more important than April’s retail figures, Marks and Spencer’s profits and even government borrowing.

Sadly, none of our politicians seems to be addressing the subject in the Election debate: so let us take a very brief look at it now. It is also a subject we will return to in the future.

Mechanised robots and AI software are predicted to eliminate 6% of all jobs in the USA over the next five years. It is easy to think that these will be lower-skilled, lower-paid jobs. In fact, it is professions like the law and accountancy that are among those most at risk, with Deloittes estimating that 39% of all legal jobs could go over the next 10 years. Another estimate suggests that 95% of all accountancy jobs could be replaced: you may find it difficult to shed a tear for accountants, but that is an entire profession wiped out.

The insurance and finance sectors are also under threat – as, astonishingly, are farmer workers. A farm in Germany has become the first to install a ‘voluntary milking machine’ allowing cows to just stroll up when they are ready…

Driverless cars will take care of taxi drivers and as CGI makes further advances there will be no need for those overpaid, temperamental actors.

The skills you will need

The key then, as you go through your career, is to develop a wide range of marketable skills. Skills like problem-solving, creativity, people management and emotional intelligence will be far more important than specific job-related skills. Creativity will be particularly key: as robotics and AI develop ever more quickly they will help us make faster decisions and process information more rapidly – but they cannot (yet) be as creative as humans.

Does this mean that the writer of this article has a job for life? Sadly not. I am afraid you can add journalists and writers to solicitors and accountants. It turns out that writing is not a problem for AI, with Associated Press using it to write quarterly reports since 2014. The world of the future will apparently function perfectly well without writers.

To be or not to be? Wait a minute: I will ask the robot…

Tweet
Pin
Share
Share
+1
Buffer