As 2012 dawns we embark on yet another year defined by huge global economic challenge. In the spirit of Janus, the IoD has been looking back on the developments of late 2011 and forward to the difficulties and opportunities of 2012. Since the UK woke up to 2012 unable to shake its lingering credit-crunch/global recession/Eurozone-crisis hangover, expectations for the coming year are heavily influenced by events of the recent past.
The final months of 2011 were dominated by the seemingly insurmountable problems of the eurozone. Another ‘last chance to save the euro’ summit came and went as IoD Chief Economist Graeme Leach published ‘This sucker is going down’ – The past, present and future of the euro crisis, arguing that the Club Med economies could be out of the euro in the first half of 2012.
This report, and the Prime Minister’s veto of a new EU treaty, was followed by a Policy Voice poll of over 1000 IoD members on issues surrounding the eurozone crisis. The survey results showed that 85% of members believe the measures agreed at the EU summit will fail to solve the crisis. Furthermore, three quarters support David Cameron’s use of the veto, and 63% want to see a looser relationship between the UK and the EU. The ongoing currency saga is certainly changing attitudes towards the EU, and we wait with baited breath to see what 2012 will bring.
One thing that is clear is that “the UK economic outlook in 2012 will ultimately be determined by events on the other side of the Channel”, says Graeme. “Our current view is that UK GDP growth will be less next year than this year. But producing a point forecast for UK GDP growth in 2012 is a futile exercise, given that it has to be hedged with so much downside risk. The downside risk is unquantifiable and so forecasting has become more hope than conviction. Much will depend on the first 3 months of the year. Intensification of the euro crisis could send the number negative very quickly.”
Director General Simon Walker used his New Year’s Message to members to call for a renewal of faith in business. Looking back on his first three months in office, Mr. Walker talks about the many “first-class business operations” and “inspiring stories” that he has encountered on his travels around the UK meeting members. He identifies executive pay and board diversity as the key business failings that need to be tackled, whilst tax rates, infrastructure and education are also top priorities for 2012. On these fronts, the IoD will be “campaigning tirelessly to make Britain one of the most competitive places in the world to do business”.
The Director General acknowledges that the economic outlook remains overcast and there is a real threat of a return to recession, but he remains confident that business leadership can make a real difference. Mr. Walker said: “2012 will be a very difficult year, and things could get worse before they get better, but your skill, your creativity and your inventiveness will help to turn things around.”
What are your hopes and fears for 2012?
