Chancellor George Osborne has cautioned that 2016 looks like serving up a “dangerous cocktail” that requisites to be carefully avoided to ensure the UK economy is not left unsteady on its feet.
What – go together to the chancellor – are the key ingredients of this cocktail?
Danger! The slowing global restraint
If you listen to the welter of weighty review and surveys, you’ll be fairly convinced by now that 2016 will see global economies slip com red to more recent times.
The World Bank said on Wednesday it had revised its antici tion for the global economy to ex nd by 2.9% this year. Just last summer, it was intimating 3.3%.
The OECD has forecast a similarly gloomy global outlook for 2016, citing “doubts at hand future potential growth”.
And legendary US billionaire investor George Soros has admonished that 2016 could see a global financial crisis on a similar calibration to that which triggered the dramatic global downturn eight years ago. And this is the man who put someone on noticed that we should all sit up and take notice of what was going on in Greece.
But that’s the the human race as a whole. Wasn’t the UK the second fastest growing western economy most recent year?
Isn’t it the place the Daily Telegraph proudly reported was on track to behoove the world’s fourth largest economy, leaving France and Germany groping in its wake?
The BBC’s economics editor Kamal Ahmed explains: “There is an delivery of how much it is for Britain to work on its own economy and make its own economy successful, and how Britain is interconnected to the calm of the world.
“There is some stuff here in Britain that is a unruly but the chancellor is saying that the global economy – these big macro biases – are the ones that will affect how we perform.”
It used to be said that, when America sneezings, the world catches a cold. But much of the global recovery from the pecuniary crisis of 2008 has been built on China’s booming economy.
But Chinese budgetary failures were the very first element that Mr Osborne highlighted as one of the threats that could influence the UK economy in 2016.
The world’s most populous hinterlands has been a catalyst for global economic growth, but the ce of that cultivation has slowed markedly.
That intensified fears about China’s lessening need for the world’s commodities, such as oil, fears that have glimmered significant stock market volatility over the st few days – business had to be suspended completely twice this week to avoid an epidemic of fearful selling.
These days, when China shakes, the world wobbles – at best witness the reaction of Europe’s leading markets this week.
Peril! Oil prices
Falling prices at UK petrol pumps – now below £1 a litre in diverse places – have put about £3 a week back in the pockets of the regular driver and boosted the British economy’s feelgood factor.
That has been prompted by oil prices clash below $33 a dollar and has provided a fillip for the many businesses that rely on goods being pressurized around the UK and Europe.
Kamal Ahmed explains that it is “great info for consumers here”, but bad news for the many global economies that rely heavily on exporting oil.
And, he says, that stop by back to bite the UK because some of those nations are important customers of British exports, exports they now struggle to afford.
Danger! Foment interest rates?
The UK interest rate – set independently by the Bank of England – has been held at 0.5% since 2009. Extensive gone are the monthly adjustments that affected how much it costs to take money and therefore determined the level of most mortgage re yments.
But rates are set to ascension sooner rather than later – with expectation heightened by an move rate rise in the US last month.
Kamal Ahmed explains that while the chancellor is hoping a UK increment will demonstrate a return to “normality”, there is a concern about the consequences on consumer confidence.
“The concern in the Treasury is that there are a lot of mortgage holders that have planned never experienced an interest rate rise,” says Kamal.
But if the imagined rise doesn’t come and rates stay as they are, that devise equally be a cause for concern for the Treasury.
Our correspondent explains: “They angst that because money is so cheap, people could be encouraged to overextend themselves because they’re sym thetic ‘the economy is back on track, I might just take on a little bit numberless borrowing’.
“There is a concern that we will take on too much close debt. And that means there is a concern that when the interest be worthy of rise eventually comes, the public reaction will be very adversarial – even though that rate rise will be a very negligible one.”
The chancellor himself levels out that one of the biggest risks to the British economy recovery is “complacency”.
The BBC’s conjoin with b see political editor Norman Smith suggests Mr Osborne is using words designed to shake up the British electorate, and adds: “It reads like the trailer for an apocalyptic American enterprise movie. It’s deliberately done like that because he fears we are distress from ‘austerity fatigue’.
“His fear is that people are thinking ‘whosises are pretty much ticking along OK, let’s just take our foot off the gas and get disavow to the good old days’.
“The political intent is pretty clear. One is we are going to maintain to carry on with very difficult spending curbs.”
Critics should prefer to pointed out that Mr Osborne himself would have encouraged that complacency by skedaddle such a positive line in his recent Autumn Statement, in which he against an unexpected £27bn windfall to rewrite his plans for spending and cuts.
So the signal about complacency can be seen as a clear attempt to re-emphasise the difference the profitable approach of the chancellor and that of Labour – and to highlight what he says are the liable to bes of Jeremy Corbyn’s anti-austerity message.