ECONOMIC weakness in the US will make economic recovery in the UK more difficult, an audience of South Wales business leaders has been warned.
Speaking to 100 business-owners and entrepreneurs at the University of Wales Institute, Cardiff, Royal Bank of Scotland economic adviser James McCann said, given the importance of the US as a market for British goods, problems there would be felt here in South Wales.
He said there was now more pessimism over the UK’s economy as a result of the problems in the eurozone, and the loss of the US economy’s AAA credit rating with Standard and Poor’s.
That downgrade came after a political stand-off in Washington which raised the prospects of the world’s biggest economy defaulting on its debt.
“The real problem in the US isn’t the political tussle or any real likelihood that the government will default,” said Mr McCann. “It’s really about worries that its economy is stagnating. Without demand from the US, global economic prospects look much weaker.
“This, combined with the problems in the eurozone, which also threaten global growth, is the major reason for the sharp tumble in stock prices across the world.”
Mr McCann warned the audience that the major falls seen on the London Stock Exchange in recent weeks were likely to have an impact on consumer spending.
“The fall in equity markets wiped a big chunk off wealth in the UK,” he said. “The less wealthy we feel, the less we want to spend so this alone could further delay the recovery in consumers’ confidence needed to boost domestic demand.”
But a weaker global economy is also likely to limit an upturn in international trade. “The US is the UK’s biggest single overseas market, accounting for just about 15% of UK and 26% of Welsh exports, while exports to the eurozone account for 55% of UK and 44% of Welsh exports,” said Mr McCann.
“Inevitably a slowdown in these major economic areas will have implications for the pace of the UK recovery.”
However, the economist told the Welsh businessmen he expected the recovery to continue, albeit at a slower pace than most experts had thought even three months ago. But he warned the recovery was by no means assured, with testing times ahead for many firms.
“It will be a bumpy road ahead,” he said.
By Rhodri Evans
Source://www.walesonline.co.uk
Speaking to 100 business-owners and entrepreneurs at the University of Wales Institute, Cardiff, Royal Bank of Scotland economic adviser James McCann said, given the importance of the US as a market for British goods, problems there would be felt here in South Wales.
He said there was now more pessimism over the UK’s economy as a result of the problems in the eurozone, and the loss of the US economy’s AAA credit rating with Standard and Poor’s.
That downgrade came after a political stand-off in Washington which raised the prospects of the world’s biggest economy defaulting on its debt.
“The real problem in the US isn’t the political tussle or any real likelihood that the government will default,” said Mr McCann. “It’s really about worries that its economy is stagnating. Without demand from the US, global economic prospects look much weaker.
“This, combined with the problems in the eurozone, which also threaten global growth, is the major reason for the sharp tumble in stock prices across the world.”
Mr McCann warned the audience that the major falls seen on the London Stock Exchange in recent weeks were likely to have an impact on consumer spending.
“The fall in equity markets wiped a big chunk off wealth in the UK,” he said. “The less wealthy we feel, the less we want to spend so this alone could further delay the recovery in consumers’ confidence needed to boost domestic demand.”
But a weaker global economy is also likely to limit an upturn in international trade. “The US is the UK’s biggest single overseas market, accounting for just about 15% of UK and 26% of Welsh exports, while exports to the eurozone account for 55% of UK and 44% of Welsh exports,” said Mr McCann.
“Inevitably a slowdown in these major economic areas will have implications for the pace of the UK recovery.”
However, the economist told the Welsh businessmen he expected the recovery to continue, albeit at a slower pace than most experts had thought even three months ago. But he warned the recovery was by no means assured, with testing times ahead for many firms.
“It will be a bumpy road ahead,” he said.
By Rhodri Evans
Source://www.walesonline.co.uk
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