| 16 November 2012 | Does the decision to repatriate QE proceeds to the Treasury actually matter? | This week’s Inflation Report press conference was dominated by questions about the decision to repatriate proceeds from APF gilt purchases to the Treasury. Both the Bank and Treasury have passed it off as simply being good cash management, with relatively few implications for the economy. In contrast, a number of commentators have been highly critical, suggesting that it further blurs the line between fiscal and monetary policy and reflects a cynical attempt to make it easier for the Chancellor to achieve his borrowing targets. These arguments seem to hold little water; the changes do not obviously weaken the MPC’s control over monetary policy and could easily make it harder for the Chancellor to comply with his fiscal mandate. |
| 19 October 2012 | Have the advanced economies suffered a permanent loss of output? | The concept of the output gap, i.e. how much spare capacity there is in the economy, has taken on increasing importance in recent years with many governments adopting cyclically adjusted targets for fiscal policy. In many of the advanced economies GDP levels remain well below their pre-crisis peaks. Were we to assume that potential output has continued to grow at historic rates in the past five years, this would suggest double-digit output gaps across a number of countries. However, as commentators analyse the causes of the financial crisis and its implications, some have concluded that it has inflicted structural damage to potential output which will never be reclaimed, implying much smaller output gaps. We find that most countries have seen a permanent loss of potential output over the past five years, albeit to widely varying degrees. The largest losses will have come in countries which have experienced at least one of two factors – a systemic banking crisis or a sovereign debt crisis. By 2011 we estimate that potential output in the US and UK had fallen around 7% below where it would have been had the pre-crisis trend continued. In the case of the UK, this estimate is smaller than that of the OBR. As such, we argue that there is a larger output gap and that there is more scope for the public finances to improve as the economy recovers. Therefore, fiscal policy may have been tightened by more than was necessary. |
| 18 October 2012 | The Economic Outlook for London | London’s output is estimated to have grown by 2.6% in
2011, meaning that London’s recovery from the financial crisis has been more than three times stronger than that of the UK as a whole. The jobs market has also been buoyant and we expect London employment to regain its pre-recession peak this year. A softer period is in prospect in the short-term, as the escalation of the Eurozone debt crisis and domestic squeeze from persistently high inflation means that we expect London’s GVA to grow by just 0.4% in 2012. However, thereafter we expect momentum to build, with London expected to comfortably outperform the national average over the medium term, driven by its strong financial and business services sectors. |
| 20 July 2012 | Is the consumer squeeze finally coming to an end? | The consumer sector has endured a torrid five year period, with a combination of high inflation and weak earnings growth causing a severe squeeze on household finances and a steep decline in spending. By the end of 2011 consumer spending was still almost 6% below the pre-recession peak, a marked contrast with previous recoveries when spending had risen well above previous peaks by this stage. The squeeze was at its most severe last year, but some light is emerging at the end of the tunnel. Inflation has already begun to cool and we expect the CPI measure to move back below the 2% target by August, bringing prices back into line with wages. Stronger household finances and an improving economic backdrop should generate a gradual pickup in consumer spending from the second half of this year. Tourism activity around the Olympic Games is expected to provide a further boost, pushing spending growth into positive territory this year at 0.2%. As real incomes strengthen, growth is expected to accelerate to 1.4% in 2013. Spending growth should pick up further in subsequent years, as the wider recovery becomes more firmly entrenched. However, the pace of the consumer recovery will continue to be constrained by the need for households to deleverage further and spending is not expected to return to previous peaks until mid-2015. |
| 20 April 2012 | The Economic Outlook for London | Incorporating new and revised data, our estimate of London’s output growth in 2011 has been adjusted upwards to 1.9% - a creditable performance given the slow growth of the UK economy and London’s exposure to financial services. This performance was driven by the construction, information & communications and accommodation & food services sectors. London’s overall performance is expected to worsen slightly in 2012, with financial services forecast to show hardly any growth. However, a pickup in global growth, plus stronger consumer spending and business investment, should underpin an acceleration in London GDP growth in 2013, with output set to accelerate further over 2014-15. Employment growth for 2011 has also been revised upwards and is now estimated to have been 2.3%. The short-term outlook is weaker, with job losses expected in all public service sectors and the private sector struggling to create jobs in the face of weak demand. But over the longer term, as the recovery gains momentum, employment is forecast to return to its pre-recession growth rates of around 2% a year. |
| 20 April 2012 | The aggregate mortgage repossessions outlook | The main drivers of mortgage possessions rates are three economic variables - the debt service ratio, the proportion of mortgages in negative equity and the unemployment rate - as well as forbearance policy and credit factors, including previous credit quality, access to refinancing opportunities and income support policy. As in the 1990s mortgage crisis, the 2008-9 upturn in the possessions rate was preceded by lower lending quality and rising debt and house price levels, accompanied by growing negative equity and unemployment. However, there is a stark difference. The 1990s crisis was triggered by a large rise in interest rates, and policy constraints prevented the reduction of rates. The recent rise in the possessions rate preceded the most dramatic interest rate reductions in British economic history. The lower interest rates and other policy interventions caused the UK possessions rate to peak at the beginning of 2009 at around half the peak experienced in the 1990s crisis. Our estimates suggest that possessions would have been at least 23 percent higher in the absence of policy interventions such as greater forbearance and more generous income support for those with payment difficulties. |
| 20 April 2012 | The importance of the size of the output gap to fiscal policy | The question of the size of the output gap and forecasts for growth in potential output have become highly relevant for UK fiscal policy since the Chancellor adopted a cyclically-adjusted target for public finances. Targeting of cyclically-adjusted variables has a range of advantages. It allows for countercyclical fiscal policy while ensuring long-term fiscal sustainability and hence brings with it fiscal discipline and some degree of predictability. Discipline and predictability should rewarded by sovereign debt markets by lower interest rates on government debt. However, targeting of cyclically adjusted variables is certainly not a panacea, not least because it relies on accurate estimates and forecasts of potential output and the output gap, which are inherently difficult to obtain due to the unobservable nature of potential output, and consequently introduce a high degree of uncertainty. |
| 30 March 2012 | Will 2012 be a better year for the UK consumer? | This week’s Quarterly National Accounts confirmed what a difficult year 2011 had been for the UK consumer, with the steepest decline in real household incomes since 1977 leading to a significant drop in consumer spending. While there was a pickup in spending in Q4, this appears to be largely a function of aggressive discounting by retailers and recent retail sales figures suggest that this effect is already beginning to fade. While prospects for 2012 do not look quite as gloomy, progress is still likely to be slow with the anticipated improvement in household finances being hindered by the rise in oil prices. |
| 21 March 2012 | UK Budget 2012 | The Budget saw the Chancellor reaffirm his confidence in his austerity plan and confine himself to tinkering at the edges. Despite lower than expected borrowing in the first ten months of the financial year, he opted for a fiscally-neutral Budget with only a few measures aimed at supporting businesses and consumers. Among the headline grabbing measures were an immediate cut in the corporation tax rate from 26% to 24%, a cut in the 50p top rate of income tax to 45p from April 2013 and an increase in the personal allowance to £9,205 in April 2013. The Chancellor had limited room for manoeuvre, so his strategy of steering clear of any major giveaways seems broadly sensible. However, it was disappointing that he failed to target the two weakest areas of the UK economy – the housing market and elevated levels of youth unemployment. Alongside the Budget, the Office for Budget Responsibility (OBR) also released its economic forecasts. They were little changed from November’s Autumn Statement, and in our view seem a touch too optimistic. |
| 29 January 2012 | IFS Green Budget Report | The Institute for Fiscal Studies’ Green Budget was launched today in collaboration with Oxford Economics. We jointly presented the research examining the prospects for public finances ahead of next Month’s Budget in the UK. All the presentations and report itself can be found Here together with the associated press release: “Borrowing set to undershoot official forecasts, but downside risks limit room for manoeuvre" |
| 24 January 2012 | Why have UK exports underperformed over the last decade? | During the past decade, the UK has continued to lose market shares in world trade markets, with an acceleration of this trend during 2008-2010. While exports by other developed economies have also underperformed, some countries such as Germany have been able to increase their market shares during this time. Within overall exports, while the UK’s services exports have performed well, goods exports have underperformed. We find that while worsening competitiveness has played a role in the earlier part of the decade, the geographical focus of UK exports, with a relatively small presence in the fastest growing markets, has been the main factor behind the UK’s exports’ underperformance. A better orientation towards strong growth markets could have raised exports of goods by around 10% by 2010, which would have lifted GDP by around 1% or close to £15 billion. In addition, we find that the UK’s goods exports have underperformed compared to what their geographical focus and competitiveness would have suggested. We attribute this to a suboptimal presence in the goods most in demand, in particular machinery equipment that emerging markets heavily purchased over the last decade. |
| 24 January 2012 | The UK long-term outlook | Business surveys and labour market indicators are offering widely contrasting signals as to the degree of spare capacity in the UK economy. On balance, we place a slightly greater emphasis on the indicators of the labour market, which can generally be measured more accurately and which better fit with the anecdotal evidence. Based upon this data, we estimate that the output gap was around -3.2% of potential output at the end of 2011. This is much lower than the 2009 peak in the output gap of -6.1%, but it does imply somewhat more spare capacity than estimated by OBR. A range of factors - including a higher NAIRU, lower migration flows and tight credit conditions - mean that our forecast shows potential output growing by just 1.6% a year in 2012-16, with growth during that period accelerating from just 0.6% in 2012 to 2% a year in 2015–16, as some of the negative legacy effects of the financial crisis gradually fade. The large output gap will allow stronger growth in actual GDP, which we forecast will grow on average by 2.1% a year over the next five years, but this would still represent a significant slowdown compared with previous cycles and is somewhat weaker than the OBR’s forecast. |
| 30 November 2011 | Chancellor forced to deliver a grim dose of reality | The Chancellor’s Autumn Statement on 29th November 2011 was overshadowed by the OBR’s weak forecasts for growth and public finances. The OBR expects the economy to grow by just 0.7% in 2012, with the forecast for borrowing revised up by a cumulative £112bn for the four years to 2015/16. This gave the Chancellor barely any room for manoeuvre in finding funds for schemes to promote growth, so in the circumstances, his measures were encouraging. They include a variety of sweeteners for the squeezed consumer, plans to increase capital spending and various initiatives to increase the level of youth employment. On the downside, however, the weaker forecasts mean that current spending will need to be slashed further over the first two years of the next parliament in order for the Chancellor to meet his fiscal rules. |
| 22 November 2011 | The importance of family businesses to the UK economy | Oxford Economics has undertaken some research on the importance of family businesses in the UK economy for the Institute of Family Business (IFB). The report shows that family firms generate revenues of £1.1 trillion a year, and provide 9.2 million jobs in the UK – two out of every five private sector jobs or almost one in three of total jobs. Family businesses contribute an estimated £81.7 billion in tax receipts to the UK Exchequer, which amounted to 14% of total Government revenues in 2010. |
| 20 October 2011 | The Economic Outlook for London | The current climate of uncertainty across the world economy and the renewed financial turmoil mean that our estimate for GDP growth in London in 2011 is just 0.8%, which is much weaker than previously expected. The global outlook is becoming starker, with the Eurozone debt crisis remaining unresolved and the possibility that the US will head back into recession, and this is reflected in our London forecast. In the medium term the forecast is for output growth to regain momentum in 2012-13 and then stabilise at just below 4% per year over 2014-15. |
| 20 October 2011 | Is the health of the banking sector a threat to the economic recovery? | The financial sector remains fragile in the aftermath of the recent crisis and there are some considerable headwinds in terms of forthcoming regulatory changes and an uncertain economic outlook. These challenges appear particularly acute for the banking industry, which is facing intense pressure to deleverage and reduce its risk-taking behaviour. Although such downsizing of banks can be viewed as a welcome rationalisation of the industry following an unsustainable credit boom, an overly cautious approach to lending in the aftermath of the crisis also risks delaying the economic recovery. |
| 7 October 2011 | What do the Blue Book revisions mean for the UK outlook? | This week saw the delayed publication of the Q2 Quarterly National Accounts, incorporating the annual Blue Book balancing and a series of changes to methodology and coverage. The most noteworthy revisions were for the 2008-09 period, with the recession now reported to be deeper than previously thought, but also a little shorter. The growth rates for the most recent two quarters were both revised down by 0.1 percentage point, meaning that as of 2011q2 the economy was smaller than it had been in 2010q3. Even though this week’s PMI surveys for September held up surprisingly well it is now apparent that GDP growth in 2011 is likely to fall short of 1% and it was against that backdrop that the MPC chose to restart its programme of asset purchases. |
| 12 September 2011 | What does the Vickers Report mean for UK banks? | This week saw the long awaited final report of the Independent Commission on Banking (ICB) led by Sir John Vickers. As expected it recommended the separation of retail deposit-taking from investment banking activities, though the banks were afforded a degree of flexibility over where they drew the ring-fence and were given much longer to implement the changes than they had expected. The Chancellor appears likely to accept all of the main recommendations, which appear to be a sensible compromise between the desire to introduce greater stability without unduly damaging growth prospects or the competitiveness of UK banks. |
| 1 August 2011 | UK Regional Summer 2011 Forecast Update | Since the publication of our Spring 2011 forecast, our central forecast for GVA has been revised
downwards to 1.5% for 2011, compared to 2.1% in the Spring. This reflects the fragile nature of
the recovery to date. We project that it will be 2013 before the recovery really gathers pace as
both consumers and the government sectors represent a drag on the short run outlook. Falling
real incomes, employment uncertainty and rising prices are likely to be the key factors holding
back consumers. Public spending cuts are beginning to bite in the form of a reduction in
procurement levels and recruitment freezes, hampering the recovery and weakening both
consumer and business confidence. |
| 21 July 2011 | How much further have UK house prices to fall? | The past forty years have seen a sustained appreciation in real house prices in the UK, albeit with substantial volatility. The cycles have been driven by shocks – both positive and negative – to household income and employment, inflation and interest rate shocks, and shifts in the availability of mortgage finance. The recent downturn in prices reflects weaker household incomes and employment, as well as a dearth in mortgage funding, and with these conditions likely to improve only very gradually, further declines in house prices are probable. However, further out the outlook is more positive, with the imbalance between population growth and housing supply expected to bring about a resumption in real house price growth. This constraint, plus the continuation of a relatively low inflation and low interest rate environment – by historical standards – mean that the switch seen in key affordability measures over the past couple of decades is likely to persist during the next ten years. Some commentators expect the house price to earnings ratio to fall back in line with its long term average of 4-5 over the coming decade, but we do not think this is plausible - such a scenario would demand a further fall in house prices of approximately 20%, but this would necessitate a recession of such scale that interest rates would be kept at current lows for some years yet. |
| 21 July 2011 | How will the squeeze on UK household finances affect spending? | Over the past thirty years consumer spending has consistently been the key driver of UK economic growth, but the consumer boom came to an end in early-2008 when first the spike in oil prices and then the onset of the credit crunch triggered a steep consumer retrenchment. The peak-to-trough decline in consumer spending was significantly greater than those endured in either of the two previous UK recessions and the subsequent recovery has been much weaker, even though the MPC responded aggressively to the crisis by rapidly slashing interest rates to 0.5%. In our view prospects for the next couple of years are relatively bleak, with household finances under severe pressure. It is likely to be 2013 before consumers really begin to enjoy the economic recovery, but even over the medium term we are unlikely to be able to achieve the pace of growth in consumer spending that we had become accustomed to over the decade prior to the recession, with the consumer facing a lengthy battle to return household debt to more sustainable levels. |
| 20 April 2011 | The Economic Outlook for London | Revised data indicates the recession in London was somewhat more severe than previously thought. Based on this data and latest labour market indicators we have substantially revised down our estimate of growth in 2010. However, moving into 2011 the latest indicators remain consistent with our view that London will lead the UK recovery and by 2013-14 we forecast that London will be enjoying growth in the order of 4% per year, assuming the global recovery (the key driver of London’s prospects) goes to plan. The corollary of a more pronounced downturn is that the labour market will be starting from a slightly weaker baseline – moving into 2011 employment is around 30,000 lower than we had previously anticipated. However, there is an impact on the level of employment from 2009 onwards from changes in ONS methodology, and alternative means of calculating London employment do yield slightly different pictures. We have made only minor revisions to our forecast of the labour market recovery, which should begin in earnest next year. |
| 20 April 2011 | Should the MPC increase interest rates? | CPI inflation is currently double the MPC’s 2% target and has now been above the target for sixteen successive months. This has put the MPC under increasing pressure and already three members of the nine-man Committee have moved to voting for an increase in interest rates. However, with the outlook for growth being uncertain and inflation being heavily affected by a series of temporary factors, thus far the majority have been content to maintain the status quo, in the belief that inflation will return to the 2% target within the two-year timeframe covered by the MPC’s remit. We think that the chances of a wage-price spiral developing are very low and, as such, are confident that inflation will move back to the 2% target of its own accord next year. Therefore, an early increase in the Bank Rate would be unnecessary and would only serve to further increase the pressure on the consumer sector by pushing up debt servicing costs. |
| 20 April 2011 | The economic contribution of BAE Systems to the UK | Oxford Economics, in partnership with Geoeconomics, has examined the economic contribution of BAE Systems to the UK economy. The study finds that BAE Systems' direct contribution to UK GDP from activity within the company itself was £3.3 billion in 2009. In addition, the company's £4.1 billion procurement spend from 9,000 different UK suppliers helps to support a further £2.4 billion of GDP. When the impact from the spending of BAE Systems' employees and those in the supply chain are included, BAE Systems' total value added contribution to GDP rises to £7.1 billion, with a total of 125,000 FTE jobs supported. The range of economic indicators considered in the study also includes investment, taxation and Research and Development. In addition, as well as the impact on the national economy, the benefits of the company to individual regions and local areas are also assessed. |
| 19 April 2011 | Can exports power the UK recovery? | The UK has consistently lost share of global exports since the Second World War, with the export performance in the decade prior to the financial crisis being particularly disappointing. We attribute the poor performance in the ten years prior to the recession to a combination of a lack of penetration of emerging markets, in particular the BRIC countries, and a loss of competitiveness brought about by a persistently overvalued pound. However, future prospects look more encouraging. Though it lags behind many of its competitors in the developed world, the UK has made some encouraging progress in re-orientating its exports towards emerging markets in recent years. Furthermore, the gain in competitiveness delivered by the steep devaluation of the pound over the past three years will also help UK exporters to gain market share in more traditional markets such as the EU and the US. |
| 23 March 2011 | UK Budget 2011 | The Chancellor had little room for manoeuvre and he delivered a fiscally-neutral Budget which left the
severe fiscal retrenchment already outlined in last June’s Emergency Budget in place. But he did
announce a number of small, carefully targeted, measures aimed at alleviating the pressures on
consumers and stimulating business investment |
| 3 March 2011 | The impact of international students in Wales | The Wales International Consortium, Higher Education Wales and the Higher Education Funding Council for Wales jointly commissioned Oxford Economics to measure the economic impact of the international and EU students studying in Wales in 2009/10. Additionally, the study conducted a survey of over 22,000 international and EU alumni to examine the contribution to Wales that these alumni can continue to make, even if they leave the country after their studies. |
| 25 February 2011 | Is the MPC beginning to lose its nerve? | The past couple of weeks have seen the monetary policy debate step up a notch, with inflation reaching 4% and a third member of the MPC joining the hawks in voting for higher rates. Markets have taken this as a sign that the Bank is about to embark on an aggressive series of rate hikes, but with deep divisions on the MPC and large question marks over the underlying strength of the recovery, we are far from convinced that the MPC will move as aggressively as markets expect. |
| 21 January 2011 | Will the public spending cuts bring about a labour market relapse? | The labour market displayed a remarkable degree of resilience during the recession and the early part of the recovery, but recent data has suggested that this has begun to peter out. We expect this trend to continue during 2011, with private sector hiring likely to remain subdued while firms try to regain some of the substantial loss of productivity endured during the recession. With the public sector likely to shed jobs at an increasing rate, we expect this to cause unemployment to nudge upwards to 2.6 million, or 8.2%, on the ILO measure by the end of this year. |
| 20 January 2011 | The regional mortgage repossessions outlook | The main drivers of mortgage repossessions rates are three economic variables - the debt service ratio, the proportion of mortgages in negative equity and the unemployment rate - as well as forbearance policy and credit factors, including credit quality, access to refinancing opportunities and income support policy. Simulations of different scenarios up to 2015 suggest that softer house prices in 2011 combined with some withdrawal of income support would be likely to lead to a small upturn in possessions orders in most regions. However, the most serious potential cause of rising possession rates would be some return of mortgage interest rates to more 'normal levels'. Much then hinges on when this is likely to occur. |
| 19 January 2011 | Would tighter monetary policy choke off the recovery? | With CPI inflation likely to rise above 4% in the early months of the year, the MPC is coming under increasing pressure to consider increasing interest rates. We have consistently argued that such a move would be premature and that in the absence of any second-round effects on wages, inflation is likely to move back below the 2% target in early 2012 when the VAT rise falls out of the calculation. However, there is a chance that the MPC might lose its nerve and begin to put up rates, particularly if commodity prices continue to climb, and we have used the Oxford Economics' Global Macro Model to test the impact of such a scenario on the UK economy. We find that premature action from the Bank of England would not only cause growth to slow significantly over the coming year, but it would also throw the governments' fiscal plans into question. |
| 22 December 2010 | Why is inflation so high and will it last? | Last week’s consumer prices release saw CPI inflation surprisingly increase to 3.3%, its highest rate since May, leading to further calls from inflation hawks for an early increase in interest rates. However, while the rise in inflation was a surprise, in our view it does little to change the overall outlook – the elevated level of inflation is largely due to VAT and short-term pressures from commodities and while inflation is likely to remain close to 3% for much of 2011, it should drop back below target in early-2012 once next month’s VAT increase has fallen out of the calculation. |
| 15 November 2010 | Economic contribution of UK hospitality industry | Oxford Economics was commissioned by the British Hospitality Association to provide a comprehensive assessment of the economic contribution of the core UK hospitality industry to the wider UK economy. The report identifies the various economic contributions that the hospitality industry makes to the wider UK economy and provides scenario analysis of the potential future contribution of the hospitality industry under a range of different assumptions. |
| 15 November 2010 | The size and health of the UK Space Industry | The biennial Size and Health survey is a key barometer of the performance of the UK’s space sector. The UK Space Agency contracted Oxford Economics to conduct the 2010 Update of the survey, covering the years 2007/08 and 2008/09. The findings of the survey provide a crucial insight into how the sector fared, including identifying which areas experienced consolidation or contraction during the recession, as well as highlighting those areas which bucked the overall trend to record growth over the survey period. |
| 1 November 2010 | The role of housing in the UK Economy | The Homes and Communities Agency recently released a report on the "Role of Housing in the UK Economy" which was jointly written for them by Oxford Economics and Regeneris. The report found that the way the UK housing market operates has undermined macro-economic stability – this is due to a combination of how the credit market operates as well as the sluggish supply response. Housing impacts on the macro-economy in two main ways – by the impact of activity in the housing sector and via the role of housing wealth in affecting consumption behaviour. Estimates presented on the report show that the recent fall in housing activity contributed to a 1% fall in GVA and the impact of the fall in house prices on consumer spending contributed a further 1% fall. Put another way, the impact of changes in the housing market contributed to around a third of total fall in UK GDP from 2007 to 2009. Looking forwards, the report argues that the balance between demand and supply will either be reconciled by renewed house price inflation, leading to restrictions of access to housing through its price or through a shortage of mortgage finance. The former would represent a return to the characteristics of the housing market in the decade leading up to the onset of the credit crunch in 2007. The latter would represent a return to pre-1980 style credit rationing, and would lead to lower house price inflation. It might mitigate some of the adverse impacts of the housing market on affordability and macroeconomic stability. It would not, however, deal with the underlying shortage of housing. The latter can only be dealt with through a substantial increase in housing supply which will depend on the ability of the planning system to fee up housing land and the extent to which substantial additional private finance can be brought into the private rental market.
For further details see:
http://hcaadmin.com/public/documents/Housing_Investment_and_the_Economy.pdf
|
| 20 October 2010 | Few surprises - but much pain - in the CSR | Wednesday's eagerly awaited Comprehensive Spending Review (CSR) yielded few surprises, with the Chancellor sticking with his plan to aggressively retrench through severe real terms cuts in public spending. He successfully met his key challenge of agreeing spending settlements while keeping within the spending envelope that he set out in June's emergency Budget. The main difference compared with the Budget was the decision to place a greater emphasis on cutting welfare spending, which meant that departmental budget cuts, while still swingeing, were generally not as bad as had been feared. |
| 19 October 2010 | The economic outlook for London | Though London was hit hard by the effects of the global financial crisis, with GDP estimated to have fallen by 4.8% last year, it has recovered strongly since then and we expect it to lead the UK recovery, growing by 2% in 2010. Further out prospects are even better, with demand for the capital's high value services exports set to underpin growth of more than 3% a year over the medium term. The labour market outlook is more subdued, with the governments' decisions to axe a large number of quangos, abolish the London Development Agency and relocate many government workers, likely to compound the impact of wider spending cuts and result in a significant decline in public sector jobs over the next five years. However, we are optimistic that stronger financial and business services hiring will be able to more than offset the impact of public sector jobs losses. |
| 19 October 2010 | Winners and losers in an age of austerity | June's emergency Budget saw the new coalition government lay out plans for the most aggressive programme of fiscal tightening in a generation. This month's Comprehensive Spending Review will bring greater clarity on where the spending cuts will fall, both in terms of welfare reform and departmental budgets, but it is already apparent that the tightening of policy will affect all members of society, old and young, in work or out of work. We have been looking at ways of monitoring the impact of the government's tightening package on the UK economy and we have constructed two tools to help us in this regard. Firstly, we have developed local area 'risk' and 'response' indices to analyse how much of an impact the cuts are likely to have on individual UK local authorities and how well these areas will be able to respond to the challenges. Our second tool is the Hard Times Table, developed in collaboration with Sky News to analyse the impact of the recession and subsequent fiscal tightening on the finances of the typical individual. |
| 19 October 2010 | Should the Bank launch QE2? | UK monetary policy is at a crossroads, with members of the Monetary Policy Committee seemingly split in three ways. In our view the arguments for higher interest rates are weak and any tightening of monetary policy, alongside the planned tightening of fiscal policy, would be premature at this stage and would risk threatening the recovery. However, that is not to say that policy should be loosened any further either; a range of indicators suggest that the recovery remains on track and at this stage it is difficult to make a compelling case for more quantitative easing, particularly given doubts over its potential effectiveness and that implementing any further asset purchases would present a number of logistical and presentational difficulties. |
| 28 September 2010 | The value of the UK fashion industry | The economic and social contribution of the UK fashion industry - study jointly commissioned by the British Fashion Council and the London Development Agency aiming to fully capture the economic benefits of the fashion industry |
| 15 September 2010 | The economic benefits of chemistry research to the UK | Oxford Economics was commissioned by the Engineering and Physical Sciences Research Council and the Royal Society of Chemistry, with the purpose of clearly demonstrating the economic benefits of chemistry research to the UK. The study also illustrates some of the many wider social and environmental benefits of such research. |
| 10 September 2010 | Introducing the Hard Times Table | In collaboration with Sky News, we have constructed the Hard Times Table, the first results of which were published this week. This is a monthly index which seeks to analyse the personal finances of the typical man, or woman, and track how they have changed over time. Though the idea was born out of a desire to chart the impact of the recession and the government's austerity measures, we have found that the index has a strong relationship with consumer spending, so this indicator also has the potential to inform the economic debate going forwards. |
| 21 July 2010 | Can the recovery in house prices be sustained? | Though the wider economy has seen a weak and patchy recovery since the autumn, the housing market has enjoyed a strong rebound. What's more, this rally has come in spite of a number of the key economic indicators of household's willingness and ability to purchase housing remaining unfavourable. The rebound appears to have been the result of an acute shortage in housing supply, but this has begun to unwind in recent months and, as a result, the market has started to cool. Looking forward the drivers of housing demand are set to remain unfavourable, with the recovery in GDP growth likely to be slow and unemployment set to edge up as the public spending cuts bite. The outlook for mortgage lending is also subdued and pressures on banks to recapitalise and concerns about the possibility of further writedowns will reinforce banks' risk aversion and ensure that credit remains scarce and expensive. As a result, we expect house prices to dip over the coming year. |
| 21 July 2010 | Will aggressive fiscal retrenchment choke off the UK recovery? | The emergency Budget of late-June saw the new Chancellor, George Osborne, initiate a significant acceleration in the pace of fiscal tightening. Our modelling suggests that the Budget measures will damage short-term growth prospects but, other things being equal, the UK should avoid a double dip. Lower government borrowing should feed through into lower long-term interest rates, providing support to households and companies, while the fact that the Chancellor has 'back loaded' a significant proportion of the spending cuts means that there should be time for the recovery to become firmly entrenched before the deepest cuts begin to hit. However, there are a number of risks to the outlook. The government must first provide a credible plan for cutting departmental spending and then provide tangible evidence that it is achieving those cuts, if it is to keep markets onside. It will also be reliant on conditions outside its control remaining favourable, namely the Bank of England keeping monetary policy loose, the pound remaining weak and our most important trading partner, the Eurozone, weathering its own fiscal retrenchment. |
| 22 June 2010 | UK Budget: An ambitious bid to repair the public finances | This was an ambitious bid to repair the public finances, with the Chancellor setting a target of returning the cyclically-adjusted current budget to balance by 2015/16 and then setting out plans to reach this target a year early. The additional tightening is split 77:23 in favour of spending cuts and history tells us that austerity packages which are focused on spending have the best chance of succeeding. In the contact of the hand that the Chancellor had been dealt, this looks like a well crafted Budget. But we are concerned that the OBR has under-estimated the damage that the tightening will do to near-term growth prospects - while the effects are unlikely to be sufficient to push the economy back towards recession, it does suggest that there is some upside risk to the borrowing forecasts. |
| 20 June 2010 | The economic impact of the UK film industry | The economic contribution of the UK film industry - study for UK Film Council and Pinewood Shepperton plc in the context of the recent review of fiscal support in the UK |
| 15 June 2010 | Analysis of the employment effects of the operation and maintainence of offshore wind parks in the UK | Vestas Offshore commissioned Oxford Economics to conduct a study estimating the employment impact of offshore wind operations and maintenance activities (O&M) in the UK. In addition, the study estimated the employment impact of O&M activities in 2020 in three different scenarios relating to the Round 3 expansion of the UK's offshore wind capacity. A further scenario provided indicative estimates of the employment levels generated by O&M activities on planned capacity expansions for offshore wind in 2050. |
| 8 June 2010 | Examining Sectoral Growth in the UK | Since early-2008 the world economy has endured its deepest and longest recession since the Great Depression of the 1930s. Some commentators suggested that the UK was more vulnerable than other countries because of the long-term pattern of change in the sectoral composition of the UK economy. The period since the end of the 1990s recession was characterised by a progressive shift from primary and secondary industries to tertiary sectors. With the economy in the early stages of what is likely to be a particularly challenging recovery, given the need for considerable fiscal retrenchment and high levels of household indebtedness, there are strong arguments for considering the likely future profile of economic growth. The aim of this report is to examine the concept of re-balancing in the UK. This involves firstly establishing what is meant by “re-balancing’ and assessing whether greater balance would be desirable in the UK. It then involves an assessment of how greater balance might be achieved and how the economy might look were a degree of balance realised.
This report was commissioned by NESTA who have used our analysis to develop their own policy recommendations: http://www.nesta.org.uk/rebalancing_act
|
| 20 April 2010 | The UK long-term growth outlook | The last cycle from 1997H1 to 2006H2 saw robust growth in potential output of 2.9% a year. This was the product of a combination of exceptional factors, including strong net inflows of migrants, a decline in the NAIRU, substantial capital deepening and a shift towards high value-added sectors such as financial services. However, we expect growth of just 1.8% a year between 2006H2 and 2018H2; this is partly due to the legacy of the recession, but also because the influence of these exceptional factors will ebb away. Even after 2011, when the recovery has become entrenched, we project growth of just 2.3% a year. |
| 20 April 2010 | The economic outlook for London | Economic conditions in London deteriorated in the second half of 2008, as they did across the UK generally. And in 2009, London is estimated to have experienced one of the worst falls in output of the UK regions. However, with the UK economy now finally out of recession, economic prospects are brightening, and the short-to-medium term outlook is now more promising than it was a few months ago. With the global recovery gaining strength, world trade picking up, capital flows recovering and the weak pound supporting competitiveness, the capital should enjoy a strong rebound in exports of its high value added tradable services. Although the region may lag behind the UK in terms of output growth in 2010, from 2011 onwards we expect the capital to lead the UK recovery. |
| 4 April 2010 | A report on the economic impact of international students for the University of Exeter | : International students make a significant contribution to the UK's economy through the fees they pay, their subsistence spending while studying, and the spending of friends and relatives that visit while they study. Oxford Economics was commissioned by the University of Exeter to estimate the economic contribution the international students studying at its Exeter campus have on the city of Exeter, and the South West more widely. |
| 24 March 2010 | UK Budget: A Budget of two halves | This was a Budget of two halves, but one that was ultimately light on new policy and leaves the big question marks over the medium-term fiscal outlook unanswered. The Chancellor can be commended on resisting the urge to use the undershoot in borrowing this year for a pre-election giveaway. Instead he chose to bank the majority of it and use the rest for some carefully targeted measures to support business and employment. However, the long-held criticism of his medium-term plans remains. His forecasts for growth and borrowing are far too bullish and with scarce detail about the nature of the cuts for 2011 and beyond his plans are lacking in credibility. |
| 19 February 2010 | The outlook for commercial property | The commercial property market was one of the areas to suffer most from the onset of global recession in the first half of 2008 with capital values and leasing activity falling sharply. However, as the economic outlook stabilised in mid-2009, so did real estate indicators and the past six months has seen a strong recovery. But given the weak economic backdrop and the need to refinance a large proportion of existing loans over the next few years, significant question marks remain over the sustainability of the upturn. In our view the bigger risks are all on the downside and with the fundamentals remaining unsupportive it is difficult to see how the recent bounce can be sustained. |
| 15 February 2010 | •A report on the economic contribution of the UK heritage tourism economy for the Heritage Lottery Fund | The Heritage Lottery Fund (HLF) has requested that Oxford Economics undertake research
aimed at analysing and providing quantitative estimates of the scale of economic activity
associated with heritage-based tourism in the UK. Although similar studies have been
undertaken at a regional level, no comprehensive analysis of the links between the UK
economy and heritage appears to have been carried out in the past. |
| 18 January 2010 | How should the government fill the fiscal black hole? | Though the recession has wreaked significant damage on the public finances, most of the deficit is structural and will remain in place even as the economy recovers. Significant policy tightening will be required after the spring election, regardless of which party takes power. A political consensus has formed that cuts in public spending will form the bulk of the fiscal tightening and past experience suggests that this is the most effective method of reducing the deficit without unduly harming the wider recovery. But given the scale of the deficit, it is unlikely that tax increases can be avoided. Timing will be crucial - an overly abrupt fiscal tightening could cause the economy to relapse, but unnecessary delay in taking action would increase the risk of a credit downgrade and could require an even greater fiscal adjustment in the future. |
| 18 January 2010 | Why has unemployment not risen more in the recession? | The recession has resulted in the steepest fall in UK GDP since the 1930s yet the decline in employment has been surprisingly modest. This experience has been very different to that of the US where a less severe GDP fall has been met with much steeper cuts in employment and hours and a sharp rise - rather than a fall - in labour productivity. Part of the story is continued growth in public sector employment, but strong trends in profitability and a weak pound have also helped to mitigate the impact on private sector employment. The analysis is complicated by the possibility of measurement errors. The severity of GDP declines in past recessions has often been revised down in subsequent estimates and there is a possibility that the LFS exaggerates the current level of employment. If official data are correct then there will have to be a period of flat employment to allow labour productivity to return to trend. If the data are exaggerating the extent of the fall in labour productivity, the prospects for employment growth look much better. |
| 30 December 2009 | UK GDP per capita lower than at time of last General Election | The recession means that UK GDP per capita – a key measure of economic prosperity and living standards - is lower in real terms now than at the time of the last General Election in 2005. UK GDP per capita is estimated to average £22,700 in 2009, down from £23,000 in 2005 (when measured at today’s prices to adjust for the effects of inflation). The decline in GDP per capita during this parliament contrasts markedly with the strong rises seen through Labour’s first two terms in office. The fall in UK GDP per capita combined with the decline in sterling means that the UK has seen an even sharper decline in its relative living standards compared with other major economies. |
| 14 November 2009 | Emerging from Crisis- the prospects for London | London’s economy is pivotal to the health and success of the rest of the UK
economy, accounting for 19% of UK GDP. Over the last 18 months many
commentators have questioned whether London and the rest of the world’s major
financial centres have been mortally wounded by the global financial crisis.
Savills felt that these questions needed to be evaluated in a clear and
independent fashion, and commissioned Oxford Economics to research and
report into what has made London the City it is today, how deeply wounded it
has really been by the financial crisis, and most importantly how it will recover
and evolve over the next decade. |
| 22 October 2009 | Imbalances in EU housing markets | Estimation of a set of theory-consistent equations confirm the importance of real income growth relative to housing supply, the user cost of housing and credit market conditions to the determination of real house prices. The results show that much of the post-2001 increase in real house prices in a number of countries including the UK, France, Spain and, especially, Ireland can only be explained with reference to changing credit conditions. The implications for future UK house price movements depend on the future of credit conditions but, even under an optimistic scenario, the model suggests a double dip in house prices, with further falls in 2010 and 2011 despite the markets' recent resurgence. |
| 22 October 2009 | A return to private affluence and public squalor? | Over the past thirty years the divergence in prospects between dynamic, fast-growing, private services and a moribund public sector has been a feature of the UK economy. However, the period since 2001 has seen consumer spending growth slow markedly, eroding the dominance of private services, while at the same time the government has pumped significant amounts of money into front-line public services, greatly increasing its importance to the economy. But these trends will not last with a significant fiscal retrenchment imminent, bringing with it the prospect of much weaker job creation in the public sector. We are also more optimistic about the outlook for private services, once the banking sector has stabilised and world investment flows have recovered. |
| 22 October 2009 | The Economic Outlook for London | The recession, which had its origins in the global financial crisis that began to unfold in mid-2007, has hit London's economy hard. And in the face of ongoing financial sector constraints, a debt overhang and rising unemployment, a strong bounce - of the kind seen in the wake of the early 1990s recession - cannot be realistically expected in the short term. Nevertheless, Oxford Economics' forecasts show the recovery in the capital gaining traction by 2011, with growth into the medium term matching the robust performance of the decade prior to the recession. We expect growth over the period 2011-2019 to outstrip that of the rest of the UK and of most comparable cities across the western world. |
| 30 August 2009 | •A study of the economic case of investing in the UK defence industry | : The Defence Industries Council commissioned Oxford Economics to investigate the economic case for increasing investment in the UK defence sector as a means of stimulating the UK economy. The study examined the contribution the defence sector makes to the UK economy in terms of its supply chains, the R&D activity it conducts, the skill levels of those employed in the sector and the exports it generates for the UK. |
| 17 July 2009 | Will the recession bring about a rebalancing of the UK economy | The roots of the current world financial crisis and deep recession lie in the large imbalances that built up over the past two decades. Changes in the sectoral composition of the UK economy over the last 20 years left it highly vulnerable to the downturn. The nature of the recession means that some of the recent trends will be arrested in the short term, yet it also highlights the need for a restructuring and re-regulation of the economy over the medium term to guard against a recurrence and to ensure sustainable and better-balanced growth. |
| 17 July 2009 | Will the UK recovery outpace other major economies? | The crisis in the banking sector in the autumn of 2008 triggered a dramatic deterioration in conditions, with all of the major economies contracting sharply in 2008Q4 and 2009Q1. However, the past few months have seen the first signs that the pace of contraction is beginning to slow, both at home and abroad. Recessions brought about by a banking crisis are deeper and take longer to recover from than those caused by other factors and we expect this recession to be no different. The sheer size of the policy stimulus should mean that the US leads the global recovery. However, the UK's own aggressive monetary response, and the weakness of sterling, should ensure the UK follows close on the heels of the US and remains comfortably ahead of the major Eurozone nations, where the policy response has been considerably slower and more timid. |
| 24 April 2009 | The Economic Outlook for London | Economic conditions in London deteriorated in the second half of 2008, as they did across the UK generally. Labour market indicators showed employment beginning to fall across the region during the summer and unemployment rising sharply at the end of the year, whilst residential and commercial property markets were hit by falling prices and very weak demand. The nature of the recession, with its roots in global financial services, means London will be affected more than other UK regions. Employment is forecast to contract by more than 4% this year, equivalent to almost 200,000 job losses, and unemployment will rise significantly in response. London's economic recovery will be slow to take hold and it will be 2011 before any noticeable expansion in activity and rising employment is likely to be achieved. Thereafter, favourable structural factors should ensure London regains its position among the fastest growing UK regions. |
| 24 April 2009 | Will quantitative easing pull the UK out of recession? | The Bank of England has announced a shift to a policy of 'quantitative easing' (QE) aimed at directly boosting the money supply and bringing down key borrowing costs in order to counter the recession and the risk of a slide into deflation. QE has already had some impact in terms of reducing key borrowing costs, although the deteriorating fiscal position and the weak state of the banking system are barriers to further gains and the quantity of asset purchases may need to be stepped up yet further to overcome this. We do not expect a rapid recovery in the real economy, despite the introduction of QE, but it should help the UK avoid a damaging slide into deflation which, if allowed, would further deepen the recession. |
| 22 April 2009 | UK Budget: Darling fails to provide credible plan for the public finances | Alistair Darling's second budget was a disappointment, with the Chancellor once again failing to come up with a credible plan to restore the public finances to health. Though he has finally produced some more realistic borrowing projections for this year and next, his figures for later years are scarcely credible, relying on very strong economic growth, fiscal drag and exceptionally tight spending restraint to close the deficit by 2017/18. The dire state of the public finances had ensured that any fiscal stimulus would be very small and carefully targeted. The new measures will do little to aid the recovery. |
| 10 March 2009 | Economic impact of legislative reform to reduce audio-visual piracy | Respect for Film, representing the UK audio-visual (AV) sector, has requested that Oxford Economics undertake a quantitative analysis of the financial benefits to the AV industry of suggested additional steps to combat Intellectual Property (IP) theft in the UK. This work also includes the broader effects of such measures on the UK economy.
The report estimates that implementation of these reforms would provide direct gross revenue benefits to the AV sector of £268 million as well as benefits spread throughout the entire UK economy via multiplier effects, creating a total of £614 million in revenues to all industries, £310 million in GDP, 7,900 jobs and £155 million in taxes to government. |
| 1 March 2009 | The economic contribution of ports to the UK economy | •A study on the economic impact of ports for British Ports Association (BPA) and United Kingdom Major Ports Group Limited (UKMPG). |
| 11 February 2009 | Economic Linkages between the UK and the rest of the EU | Oxford Economics has undertaken a study detailing the economic ties between the UK and the rest of the EU, and where possible, quantifying them according to a number of parameters, such as trade, labour force, tourism, FDI, portfolio investments and banking. |
| 28 January 2009 | Will the recession damage UK long-term growth prospects? | Several exceptional factors combined to generate output growth of 2.9% a year over the last economic cycle. However, prospects for the current cycle have been undermined by the descent into deep recession, which has damaged the most successful sectors of the last cycle, reducing the expected contributions of productivity and population growth to potential output growth and meaning that a lower long-run employment rate will be a drag on prospects. Our forecast of potential output growth of just 2.1% a year between 2006H2 and 2018H2 is well below the Treasury's assumption and will have implications for future policy. |
| 24 November 2008 | Pre-Budget Report: £20bn stimulus announced but will Darling be able to pay for it? | The Pre-Budget Report saw the announcement of a £20 billion fiscal stimulus that will be paid for by higher taxes and exceptionally tight spending growth once the economy has recovered. The central plank of the Chancellor's policy is a reduction in the VAT rate from 17.5% to 15% for the next 13 months, starting on 1st December 2008. The Chancellor has slashed his forecasts for the UK economy, while more than doubling his borrowing projections and suggesting that the current budget will not return to balance until 2015/16. However, given the relatively modest planned tax increases, we are sceptical as to the ability of a future government to hit the very tight spending plans required to bring the budget back into balance. |
| 23 October 2008 | The economic contribution of the UK Games Development Industry | This report, prepared by Oxford Economics, provides an evaluation of the economic contribution of the UK Games Development industry. The video games industry value chain is organized around the production and distribution of digital content. Games Developers are the primary creative force in the video games industry, responsible for transforming original and / or licensed IP into games on a variety of platforms (such as TV-based or handheld consoles, PCs and mobile phones). |
| 23 October 2008 | The economic contribution of the UK Games Development Industry | This report, prepared by Oxford Economics, provides an evaluation of the economic contribution of the
UK Games Development industry.
The video games industry value chain is organized around the production and distribution of digital
content. Games Developers are the primary creative force in the video games industry, responsible for
transforming original and / or licensed IP into games on a variety of platforms (such as TV-based or
handheld consoles, PCs and mobile phones). |
| 8 October 2008 | Government unveils scheme to bailout UK banks | An intensification of the banking crisis has led the government to accelerate its planned bailout scheme. The package involves recapitalising the banks, doubling the size of the Special Liquidity Scheme and establishing a government-backed company to guarantee new borrowings for maturities up to three years. The package was in line with expectations and should alleviate funding concerns and support confidence in UK banks. However, the economic outlook does not just depend on banking issues, but on how consumers and companies react to recent events. In six months time, it is possible that the main constraint on growth may no longer be the banks’ ability to lend but rather demand for credit. |
| 30 September 2008 | •The impact of tourism to the UK | The impact of tourism to the UK in conjunction with Deloitte on behalf of Visit Britain and the Tourism Alliance |
| 9 September 2008 | Economic contribution of the asset, motor and consumer finance industries | A new report launched today by Oxford Economics finds that the asset, motor and consumer finance industries support 167,000 jobs and contribute over £11 billion to UK GDP. They finance 28% of all business capital investment; nearly a third of all purchases of cars and over half of all new car registrations; and 8% of all consumer spending in the UK. The report commissioned by the Finance and Leasing Association (FLA) is the first ever study of the economic importance of its members. |
| 20 July 2008 | Which parts of Great Britain are vulnerable to the credit crunch? | Oxford Economics have constructed a vulnerability index for GB local authorities, based on the proportion of jobs in sectors most at risk from the credit crunch, spreading from financial services to real estate, other business services, construction and retail and other consumer related industries. Outside central London, a number of smaller centres show up as being vulnerable, including Chester, Bournemouth, Calderdale and Macclesfield. These tend to be relatively prosperous areas with high concentrations of jobs in banking and auxiliary services. Cities are generally more exposed than rural areas but there is a considerable range in level of exposure, with Leeds, Edinburgh and Bristol more exposed than more industrial and public sector-focussed cities, such as Sheffield and Liverpool. |
| 20 July 2008 | Regional winners and losers in UK public finances | Oxford Economics' analysis shows that it is only the wider South East regions (London, the South East and Eastern) that made a positive net contribution to the UK public finances in 2006-07. It is not surprising that the South persistently provides fiscal support to the rest of the UK given the relative strengths of the different regional economies and the broadly redistributive nature of government policies towards taxation and spending, but the scale of this regional fiscal redistribution has been increasing over recent years. Looking forward, a rising UK fiscal deficit is likely to be reflected disproportionately in the South, and in London in particular, given the impact of the credit crunch on financial services, but we still expect the South to make a net positive contribution to the Exchequer. |
| 3 June 2008 | Study of the impact of the Intermediate Research & Technology Sector on the UK economy | The independent research and technology sector has an important role in fostering innovation and the exploitation of research and technological change in the UK economy. Its work is vital in helping to raise the productivity of UK companies and in connecting businesses, government and academia to the resources needed for the successful uptake of new technology. A recently released report by Oxford Economics estimates the sector contributes £3 billion to UK GDP, supports over 60,000 jobs and makes a catalytic contribution to UK GDP that runs to many tens of billions of pounds. |
| 20 May 2008 | The Economic Outlook for London | For London, and the central business district in particular, recent downward revisions to forecasts have been more acute than for the UK as a whole due to the concentration of financial services. Over the course of the last few months, headline figures of projected job losses have risen from 10,000 to 50,000, as each new forecast appears more pessimistic than the last. However, partly as a result of the momentum in the UK economy and partly a result of the robust labour market data, Oxford Economics predicts a more modest overall decline than the more bearish forecasts, with net job losses of just over 20,000 in the City of London and Tower Hamlets finance sectors over the next 24 months. Nevertheless, this is a marked downgrade in the short term from recent forecasts, showing a much more pronounced cycle in the London outlook. |
| 2 April 2008 | The Economic Contribution of BAE Systems to the UK | Oxford Economics has released a new study dealing with the economic impact of BAE Systems on the UK economy. The report finds that BAE Systems is a substantial contributor to the UK economy. BAE Systems employs 35,000 people with direct impacts including value added of £2.4 billion, exports of £4.1 billion, and a tax contribution of $500 million. However, when indirect and induced impacts are included, BAE's total economic impact is far greater than this. This work updates the results of past studies conducted in 2005 and 2004. |
| 12 March 2008 | UK Budget 2008: the chancellor’s cupboard proves bare | The Chancellor’s main message in the budget was that slower economic growth will lead to a considerable increase in planned borrowing over the next few years compared to earlier projections. But despite this, fiscal policy will not be making a significant contribution to supporting activity. The budget actually reveals that there is very little room for fiscal policy to help support growth. Public sector borrowing is set to rise significantly in the next few years, and the Chancellor actually had to tighten policy in 2009-2010 and 2010-2011 to curb this rise. With the Treasury growth forecasts relatively optimistic, and assumptions very tight on public spending growth, the risks looked skewed towards borrowing overshooting the budget targets, and remaining at uncomfortably high levels into the medium term. |
| 8 January 2008 | UK living standards to overtake the US in 2008 for the first time in over a century | Living standards in the UK as measured by GDP per capita are set to rise above those in the US in 2008 for the first time since the 19th century. UK GDP is expected to reach £23,500 per head of the population in 2008, compared with £23,250 per capita in the US.
Moreover, UK GDP per head will be over 8% higher than in both Germany and France in 2008. |
| 20 December 2007 | Credit crunch weighs on growth and threatens more severe damage | As 2007 draws to a close, financial markets remain volatile and the impact of the credit crunch is increasingly being felt. High levels of interbank rates have had a knock-on effect on lending rates to households and firms, and credit standards have also been tightened by banks, posing a risk to investment and consumption going forward.This has prompted further monetary easing by the Federal Reserve, and cuts by the Bank of England and the Bank of Canada. Central banks have also added further large volumes of liquidity to interbank markets. Asset prices remain under pressure, with weaker house prices posing a particular risk to global growth, but emerging markets continue to show few signs of a growth impact from the recent financial market turmoil. A plausible downside scenario for global growth in 2008-2009 would see significantly below trend growth across the major industrial countries. Over the last month, the odds on this scenario materialising, rather than the baseline, have risen. |
| 5 November 2007 | How hard will the credit crunch hit the economy? | Financial markets have been in turmoil over the summer, as fear of default risk in the US subprime mortgage market has spilled over. Investor fears have been exacerbated by uncertainty about the scale and distribution of losses associated with subprime exposures. The concern is that if the pressure on banks persists, their next step will be to cut back on lending to the household and corporate sectors, creating a ‘credit crunch’. A full-blown credit crunch would have a significant negative impact on growth in the major economies relative to our baseline forecasts. Such an outcome seems some way off at present, but the scale of the downside risk does appear to be having an impact on central bank thinking, and further monetary policy action may well prove necessary to head off growth risks. |
| 22 October 2007 | The Economic Outlook for London | London’s growing strength as the world’s leading financial centre has continued so far in 2007, but nervousness in global finance makes the short-term outlook more uncertain than six months ago. Our latest forecasts continue to depict London among the UK’s fastest-growing regions, but in the short term GVA growth is expected to slide from an estimated 3.9% in 2007 to 2.3% in 2008, and the downside risks have risen. Our forecast of 0.8% employment growth next year would be the first year since 2004 with less than a 1% rise in London’s jobs, and a ‘credit crunch’ scenario could see 50,000 fewer jobs in London than in our central forecast. |
| 11 October 2007 | Why Britain needs a fair deal for the South East | The South East Counties’ 9 million residents pay on average £2,000 more in taxes to the Exchequer than the Government spends per head in the South East. Oxford Economics' analysis of both tax and spending in the South East counties is contained in 'Taken for Granted: Why Britain Needs a Fair Deal for the South East' - a research report by Local Government Futures and Oxford Economics for the South Eastern Counties Leaders which evaluates taxation and expenditure flows between the South East and the Exchequer and compares funding, cost pressures, and public sector demands across the UK. |
| 26 July 2007 | The economic contribution of the UK film industry | The core UK film industry is a substantial industry, directly employing 33,500 people in 2006 and supporting a total of 95,000 jobs, taking into account those working in its supply chain and its contribution to UK tourism, trade and merchandise sales. This report, prepared for the UK Film Council and Pinewood Shepperton, assesses the different ways in which the film industry generates activity and employment in the UK economy, and the importance of the new Film Tax Relief for the competitiveness of film production in the UK.
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| 23 July 2007 | Where is the risk in global financial markets? | The positive global macroeconomic picture of recent years has led to rapid growth in the supply of and demand for risky assets, at prices which have offered little insurance against even a moderate worsening in financial market conditions. LBO market activity has exceeded its 1980s peak, and a surge in issuance of low-grade corporate debt has increased the risk of a sharp rise in default rates. Problems in the US subprime mortgage market, which could spark a broader sell-off in the structured products sector, pose a threat to the wider economy. The exposed markets have been key drivers of the rapid recent growth of financial sector activity in the US and the UK. Given the importance of the financial sector in the US and the UK, a downturn in these risky markets could have a significant impact on growth. |
| 22 June 2007 | Are current low risk spreads sustainable? | The recent signs of more widespread inflation, rising short-term interest rates and higher bond yields are raising doubts about whether the surge in credit growth seen in recent years is starting to go into reverse. Monetary conditions are clearly getting tighter in most leading economies, and the big question mark is whether recent falls in bond and equity markets are a temporary correction in a still-favourable financial market backdrop or whether it marks the start of a major reversal of the decline seen in credit spreads over the last five years. Emerging markets have been particularly favoured in recent years and emerging market assets may also be vulnerable to a shift in investor sentiment to greater risk aversion. But a consequence of improved fundamentals is that there is less risk of contagion, meaning that a generalised emerging market slump and a wholesale widening of risk spreads is much less likely than in the past. |
| 3 May 2007 | Economic outlook for London | London is driving UK economic growth, benefiting from its highly competitive position in the booming global financial and business services sector. While this is leading to increasing pressure on London property prices, commercial rents and the transport infrastructure, our forecasts suggest that the London economy should continue to outpace UK growth over the next five years. |
| 1 May 2007 | How long can the global M&A boom last? | UK Economic Outlook, May 2007 |
| 1 May 2007 | A decade of fiscal policy under New Labour | UK Economic Outlook, May 2007 |
| 1 May 2007 | The economic outlook for London | UK Economic Outlook, May 2007 |
| 22 March 2007 | UK Budget 2007: A Budget of Grand Gestures and Little Impact | This was a Budget of grand gestures but with little economic impact. What the Chancellor gave away with one hand – to great political effect – he took back with the other. As a result, the Budget does nothing to change the economic outlook. Worryingly, despite the strong performance of the economy, the outlook for the public finances has deteriorated yet again, with the Treasury projecting a current budget position £3-5 billion a year worse than in the Budget a year ago. And we doubt that even these new forecasts will be achievable as the next election increases pressure for more spending on health and education, and as the Treasury struggles to hold down public sector pay. |
| 12 March 2007 | Mental Health and the UK Economy | A substantial number of people in the UK suffer from a mental health illness with around one million people claiming incapacity benefit due to mental and behavioural disorders and over ten million working days lost due to stress, depression and anxiety. There are substantial benefits to both the economy and the Exchequer from helping people either gain or retain a job or miss fewer working days. Our estimates suggest that mental health costs the economy over £10 billion a year and the Exchequer more than £6 billion. Our econometric analysis, and results from existing research, suggests that it is likely that many schemes aimed at helping people with mental health illnesses have been, or could be, of net value to both the economy and Exchequer. However, given the range of conditions that can be described as a mental health related illness, ranging from anxiety to schizophrenia, the cost and potential benefits of supporting someone in work, or helping them return to work, will vary enormously. |
| 8 March 2007 | UK Regional Economic Outlook | Recent data shows the London and surrounding economies entering 2007 in a position of strength while casting some doubt over the strength of the northern economies and the North West in particular. The extent to which the UK's recent and prospective growth have been fuelled by the success of internationally competitive financial and business services suggests the northern regions face a challenge to overcome this. |
| 19 February 2007 | Regional contributions to UK public finances | Research by Oxford Economics shows that the south east corner of the UK is funding the rest of the country to a dramatic extent. In 2004/05 tax payers in London, South East and Eastern England contributed in net terms more than a £1,000 per head of population to the nations coffers whilst the rest of the country in varying degrees is a drain on Whitehall. When you subtract public spending from taxes raised Londoners each paid over on average more than £1,700 to the Treasury whilst their counterparts in Northern Ireland were subsidised to the tune of over £3,700 per head and their equivalents in the North East of England on average benefited by more than £2,500. |
| 2 February 2007 | UK Economic Outlook: January 2007 | In our latest UK Economic Outlook, we are forecasting economic growth to remain robust in 2007 at 2.7%. However, as inflation draws closer to “letter-writing territory”, with stronger growth supporting building inflationary pressures, it seems likely that the MPC will vote once more to raise rates, to 5.5%. But that rise should be reversed later in the year as inflationary pressures subside, thanks to both lower world energy prices and the dampening impact of higher interest rates on domestic demand. Our forecast shows inflation falling back to the 2% target in the second half of 2007, and a slowdown in consumer and investment spending leading to weaker GDP growth of 2.5% in 2008. |
| 16 January 2007 | Is UK manufacturing in terminal decline? | UK Economic Outlook, January 2007 |
| 1 December 2006 | Contribution of aviation to the UK economy | Aviation is a substantial UK industry in its own right. But its key contribution to the UK economy is in helping other sectors to operate more efficiently and to compete in the global economy, supporting productivity and economic growth across UK plc as a whole. This report updates our 1999 study on the economic contribution of the aviation industry in the UK, and extends the analysis in a number of ways. |
| 11 November 2006 | London's Place in the UK Economy | Londoners made a net contribution of £13.1 billion to UK public finances in 2004-5, almost a billion more than in the previous year. Our new report for the City of London Corporation on London’s Place in the UK Economy, 2006-7 shows how London’s positive contribution was underpinned by a strong economic performance, itself supported to a considerable extent by the financial services industry centred in the City, and by continued population growth, deriving largely from strong international migration to the capital.
While the outlook is positive for London’s economic future, London’s success in meeting the challenges of rising population and employment cannot be taken for granted, and could be undermined by potential structural constraints, notably in transport, housing and utilities. |
| 1 November 2006 | UK Feature Article: | Housing wealth and UK
consumption |
| 1 November 2006 | UK Feature Article: | The economic outlook for London |
| 1 November 2006 | UK Feature Article: | The economic impact of
international migration within
the UK economy |
| 11 October 2006 | Prospects for the UK Financial services sector | A special report by OEF for the Financial Services Skills Council |
| 28 August 2006 | Prospects for the UK financial services sector | The last five years have seen rapid growth in the output of the financial services sector, But while there has been strong growth in employment in broking and fund management, other parts of financial services have seen subdued job creation, reflecting pressure for firms to improve productivity and reduce costs in an increasingly competitive market. This report prepared for the Financial Services Skills Council assesses in detail the factors that will iunfluence the development of the sector over the next five years. |
| 1 August 2006 | European Industry: Facing up top the emerging market competitiveness challenge | UK Economic Outlook, July 2006 |
| 1 August 2006 | UK Housing Market: The impact of House Information Packs | UK Economic Outlook, July 2006 |
| 16 June 2006 | UK & Emerging Markets Outlook Conference, London Thursday 15th June 2006: | Presentations available to download here |
| 27 April 2006 | The economic outlook for London | UK Economic Outlook, April 2006 |
| 27 April 2006 | Bubble trouble- are house prices significantly overvalued? | UK Economic Outlook, April 2006 |
| 27 April 2006 | Is there a global bonds bubble- what if it bursts? | UK Economic Outlook, April 2006 |
| 24 March 2006 | What is the impact of EU expansion on labour markets? | World Economic Prospects, Spring 2006 |
| 23 March 2006 | OEF's Assessment of the 2006 UK Budget: | OEF's review of the 2006 Budget |
| 15 February 2006 | The Economic Contribution of BMW Group in the UK | A special report by OEF for BMW Group |
| 1 November 2005 | London's place in the UK Economy 2005-06 | A special report by OEF for the Corporation of London |
| 21 October 2005 | Trade liberalisation and CAP reform in the EU: | A report by OEF for Open Europe |
| 19 October 2005 | The Economic Outlook for London | UK Economic Outlook, October 2005 |
| 19 October 2005 | Economic Policies for Growth and Employment: | UK Economic Outlook, October 2005 |
| 23 September 2005 | OEF UK Sectoral & Regional Conference, Oxford 22nd September 2005: | Presentations available to download |
| 20 September 2005 | The Economic Contribution of the UK Film Industry: | A special report by OEF for the UK Film Council and Pinewood Shepperton plc |
| 19 July 2005 | Does Italy's plight threaten European monetary union? | UK Economic Outlook, July 2005 |
| 19 July 2005 | Migration within England & Wales and the housing market | UK Economic Outlook, July 2005 |
| 26 April 2005 | The changing structure of the UK economy- Implications for the current account | UK Economic Outlook, April 2005 |
| 26 April 2005 | The economic outlook for London | UK Economic Outlook, April 2005 |
| 4 February 2005 | Local housing markets and segregation in England | UK Economic Outlook, January 2005 |
| 4 February 2005 | UK Household Debt: A threat to growth or stability? | UK Economic Outlook, January 2005 |
| 20 October 2004 | China and the UK economy | UK Economic Outlook, October 2004 |
| 19 July 2004 | How tight is the UK labour market? | Economic Outlook, July 2004 |
| 26 April 2004 | Offshoring: How big an issue? | UK Economic Outlook, April 2004 |
| 11 February 2004 | The Economic Contribution of BAE Systems to the UK, and Implications for Defence Procurement Strategy | A special report by OEF for BAE Systems |
| 22 January 2004 | The impact of interest rates and the housing market on the UK economy | UK Economic Outlook, January 2004 |
| 21 October 2003 | What is the chance of a Yuan revaluation? | UK Economic Outlook, October 2003 |
| 28 July 2003 | The Economic Effects of Transport Delays on the City of London: | A special report produced by OEF for the Corporation of London |
| 28 July 2003 | The changing sources of new mortgage debt | UK Economic Outlook, July 2003 |
| 28 July 2003 | Housing, credit and the euro: the policy response | UK Economic Outlook, July 2003 |
| 23 April 2003 | The housing market and the monetary transmission mechanism in the UK, in and out of EMU | UK Economic Outlook, April 2003 |
| 22 April 2003 | UK Budget 2003 – Will taxes have to rise? | UK Economic Outlook, April 2003 |
| 23 January 2003 | Can House Prices Remain So High? | UK Economic Outlook, January 2003 |
| 22 January 2003 | The UK and EMU: Lessons from Europe | UK Economic Outlook, January 2003 |
| 22 January 2003 | War in Iraq: implications for the UK economy | UK Economic Outlook, January 2003 |
| 28 October 2002 | The economic impact of military action against Iraq: | How would a new Gulf War affect the world economy? |
| 22 October 2002 | Germany - the next Japan? | UK Economic Outlook, October 2002 |
| 22 October 2002 | Is deflation a real risk for the UK? | UK Economic Outlook, October 2002 |
| 29 July 2002 | A tale of two bubbles: | The impact of falling equity prices/booming house prices on the UK economy |
| 25 July 2002 | What are the implications of a weaker dollar? | UK Economic Outlook, July 2002 |
| 23 July 2002 | The impact of shocks on the UK economy in and out of EMU | UK Economic Outlook, July 2002 |
| 4 July 2002 | Aviation and the UK Economy | Special report produced for DETR and a consortium of airports and airlines |
| 28 June 2002 | The economic impact of express carriers for UK plc: | A special report for the European Express Association |
| 24 April 2002 | Mortgage Credit Conditions in the UK | UK Economic Outlook, April 2002 |
| 18 April 2002 | Budget phone conference: | Presentation charts |
| 17 April 2002 | UK Budget 2002: | Big tax and spending increases but little macreconomic impact |
| 17 January 2002 | Exchange Rate and Foreign Price Effects on UK Inflation | UK Economic Outlook, January 2002 |
| 17 January 2002 | Japan: Is There Any Way Out? | UK Ecomomic Outlook, January 2002 |
| 6 November 2001 | UK recessions - anatomy, causes and risks: | Detailed analysis of past UK recessions and assessment of the risk of recession in 2002 |
| 18 October 2001 | Is the UK heading for recession? | UK Economic Outlook, October 2001 |
| 18 October 2001 | Prospects for the Euro: Why has it been so weak? | UK Economic Outlook, October 2001 |
| 23 July 2001 | Shades of the late 1980s? | UK Economic Outlook, July 2001 |
| 20 July 2001 | Is the housing market set to fall? | UK Economic Outlook, July 2001 |
| 15 June 2001 | What difference would EMU entry make to the UK? | Scenario study bt OEF |
| 20 April 2001 | Fiscal policy in the UK | UK Economic Outlook, April 2001 |
| 20 April 2001 | I. The economic impacts of reducing the inflation target and II. The foot-and-mouth crisis and III. The implications of falling equity prices | UK Economic Outlook, April 2001 |
| 20 January 2001 | Equity markets and the economy | UK Economic Outlook, January 2001 |
| 20 January 2001 | What is the impact of a US hard landing? | UK Economic Outlook, January 2001 |
| 20 October 2000 | The impact of the rise in oil prices on the UK economy | UK Economic Outlook, October 2000 |
| 17 October 2000 | Sterling and the Euro | UK Economic Outlook, October 2000 |
| 22 August 2000 | OEF regional analysis: | Is the North-South divide widening? |
| 17 July 2000 | Why Do Mortgage Markets Matter? | UK Economic Outlook, July 2000 |
| 17 July 2000 | Russia: Collapse and Recovery | UK Economic Outlook, July 2000 |
| 17 July 2000 | Learning Organisations, Lifelong Learning and the Mystery of the Vanishing Employers | UK Economic Outlook, July 2000 |
| 12 July 2000 | Re-balancing the economy: alternative approaches to economic policy | A report by OEF for a group of organisations representing traded sectors. |
| 18 April 2000 | Liberalisation of Utilities and Evolving European Regulation | UK Economic Outlook, April 2000 |
| 18 April 2000 | Reviewing Bank of England Independence: The Report of the Bank of England Commission | UK Economic Outlook, April 2000 |
| 18 April 2000 | Expenditure on the NHS in Perspective | UK Economic Outlook, April 2000 |
| 5 April 2000 | What is the impact of call centres on UK regional development? | A presentation by NEIRC |
| 18 January 2000 | The Independence of the Bank Of England: an update | UK Economic Outlook, January 2000 |
| 18 January 2000 | Prudence and Pragmatism in the Fiscal Stance | UK Economic Outlook, January 2000 |
| 16 July 1999 | Evaluating the Monetary Policy Committee | UK Economic Outlook, July 1999 |
| 16 July 1999 | A New Paradigm? Understanding the evolving UK macroeconomics profession | UK Economic Outlook, July 1999 |
| 16 July 1999 | Many Models at the Bank of England | UK Economic Outlook, July 1999 |
