City Watch: Uncertainty clouds a sunny outlook for the UK economy, says Charles Sylvester

Charles Sylvester of Charles Stanley & Co, Ipswich

Charles Sylvester of Charles Stanley & Co, Ipswich - Credit: Archant

Overall, the last 12 months have been rather disappointing for the world economy and there still remain some considerable risks to global growth.

However, the recent slump in oil prices could potentially provide a massive boost, not only to manufacturers but to consumers as well., with the potential cost savings to motorists equivalent to an extremely large cut in personal taxes.

In the UK the situation would appear to be rather healthier than in other G8 countries, with the final figures likely to show that the economy has grown by about 2.6% in 2014. We have benefited from having our own central bank and currency but, as the Autumn Statement confirmed, we are still a long way from sorting out the country’s budget deficit and debt problems.

There has also been continued good news on employment with more than 500,000 jobs being created in the past year, 95% of them full-time. This helps explain why retail sales are now growing as fast as they were 10 years ago, and with the current price of oil, there should be more to come particularly if the recent figures on relative earnings are to go by.

The only cloud on the horizon is that for the first time in probably a generation, foreign investors are having to factor in political risk when sizing up the UK. At the moment the election looks as though it may not produce a clear winner with the ensuing potential threat to Sterling and interest rates.

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If, after May, a referendum on our membership of the EU seems likely, whatever one’s views on the matter, the uncertainty may well take a little gloss off the recovery.

: : Charles Sylvester is an investment manager with Charles Stanley & Co in Ipswich.

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