Economic outlook: UK21 January, 2008, 3:45. Posted by Zarathustra
Tags: Economy, UK
Commentators in Hong Kong have been talking about US economic slow down in face of the subprime crisis. How about UK? We have not been focusing on UK lately, and only focus on US. However, It does not really mean that UK is really in a much better position than US, although not many people mentioned or realized this.
At the turn of this year, I have seen two people talking about how unprepared the UK economy is in face of the current turmoil. First, Anatole Kaletsky wrote at The Economist: The World in 2008, wrote that UK is facing the first major risk of economic slow down due to a several reasons, which, while compared to the situation in US, seem to be even more worrying. First of all, the housing price in UK rose much more than US (205% vs. 103%). Second, household debts were larger (125% of disposable income vs. 104% in US). Thirdly, the UK economy is disproportionately weighted towards the financial sectors, so in the face of financial crisis, UK probably will suffer more.
Another voice saying that UK is not prepared is George Osborne MP, the Shadow Chancellor of the Exchequer, who spoke at London School of Economics and Political Science (LSE) on 11th January, criticized the prime minister Gordon Brown, who was the Chancellor of the Exchequer before he took up the position as the PM, that he was unable to make use of the prosperous economic condition in the past years to make UK be more prepared to fight for future financial crises. Large government deficit, trade deficit, increasingly inflexible taxation, all have made UK to be in an unfavourable position in face of financial crisis.
To cope with this, George Osborne proposed some measures to strengthen the position of UK. I am not going to outline this proposal. Interested reader may consider reading the transcript of his speech. No matter what, 2008 will be a tough year.