The thoughts from Graeme Leach, IoD Chief Economist

Graeme Leach, the Institute of Directors’ Chief Economist, was giving his thoughts last night at a SEGRO/IoD event.  Some interesting points:

– GDP figures (released today) likely to be weak and growth for 2013 will continue to show a weak picture.

– His favoured forward looking indicator for growth (the broad money supply measure M4X) will point to a slightly more bullish outlook for the UK economy.  This is the measure to watch, he says.  Growth of 6-9% will indicate economic growth to come.

– The big restrictions to sustained long term UK growth are on the supply side – specifically, the availability of labour (need to reduce employment red tape and regulation) and the taxation environment.

– The UK deficit still isn’t being cut fast enough.  He doesn’t subscribe to fiscal measures being the key to growth (quite the opposite) and that growth will be achieved through monetary policy (with the money supply being a key indicator of future growth, as mentioned).

– The ‘Euro’ issue, whilst quiet in the last few months, will be back.  The prospect of Quantitative Easing (QE) being conducted by the ECB has helped calm markets however problems still exist. Germany will be the key player in how this pans out, especially with memories of their own hyper-inflation (which, he argues, would be a mis-placed belief as QE will not cause hyper-inflation.  Try telling the German public that!).

– His view remains that the ‘club med’ countries will exit the Euro at some point.

– Following David Cameron’s speech on an EU referendum, his view was that this will actually be forced much sooner that the PM’s timescale.  The EU will need to address some of the issues sooner rather than later.  A new EU treaty could be on the table as soon as the end of this year/into next year at which time there is likely to be a decision to be made – more likely that at that time there would be a referendum.

– Overall we continue to be in very uncertain times, however there are some positive signs that the UK economy is starting to get some traction.  His prediction for 2014 growth?  “Almost impossible to say!”