Yorkshire Bank economist predicts slow and steady course
THE UK is heading for a period of slow but unspectacular growth in 2011 amid concerns about a possible double-dip recession and the threat of inflation, according to a leading economist.
Speaking at an Economic lunch hosted by Yorkshire Bank’s Corporate and Structured finance team in Manchester, the bank’s economist David Tinsley said that despite a predicted global growth rate of 4.4% for 2011, the bank’s prediction for the UK would be growth of around 1.5% to 1.62% for this year.
Mr Tinsley told an audience of leading figures from the North West corporate finance, business and private equity community that that until last week’s announcement of a dip in productivity output, the UK had regained 2.5% of the 6.4% of GDP lost since the start of the recession. 
He added that although the weather had played its part in causing the 0.5% drop in productivity in the fourth quarter of 2010, even if its impact was discounted growth would still have been flat.
He predicted that the austerity measures announced by the Coalition Government had not impacted too heavily on the economy to date, but as its real term spending levels were likely to fall by 20-25% over the next four years, this was likely to sap growth by around 1% each year.
“The private sector isn’t going to do much to reduce high-ish levels of unemployment,” he said.
Mr Tinsley, who is a former economic forecaster for the Bank of England, said that as inflation rates continue to rise the Bank’s Monetary Policy Committee faces some tough decisions over interest rates.
With inflation likely to continue running way above the bank’s 2% target, MPC members could either reduce rates and risk damaging the current feeble recovery, or leave them unchecked and be forced to deal with a much more serious inflation problem in two years’ time.
“The question for the UK economy seems to be, ‘Would you rather be hung or shot?'”.
“The residential property market remains weak and has been slipping since the middle of last year. If it started to take a lurch downwards, there’s not a lot that you can do in terms of monetary policy to deal with it.”
Despite this, he argued that he was confident that the UK was not lurching back towards a ‘double-dip’ recession.
“We’re more likely to see a period of slow, unexciting growth,” he said.
The event, hosted by Roddy Kilpatrick, area director at Yorkshire Bank Corporate & Structured Finance, also debated the improving North West deals scene and prospects for the region’s economy.
Taking part in the debate were:: Jonathan Edwards of law firm DWF, Peter Higton, non-executive chairman of land remediation specialist KDC Contractors; Andy Gregory of private equity firm Key Capital; Johnathan Massey of Zeus Private Equity; Aziz Ul Haq of Deloitte; David Dodds of Rothschild; Chris Belsham of KPMG and Adrian Gare, a non-executive director of Leigh-based manufacturer Ionix Systems and biotech software firm Instem Life Sciences.
