Are you feeling down about the economic outlook for 2011?

Peter Black

Are you feeling down about the economic outlook for 2011? You could be excused for feeling a little nervous at the very least, because daily three economic threats are hammered out in the Press.

The first ‘cause celebre’ for the doom-mongers is the Euro crisis.

Of course, the latest casualty is Ireland which has fuelled fears about the future of the Euro. However, it’s clear that the EU is committed to saving the Euro and it has already put measures in place to deal with Greece. So should we be living in fear? Well, as I look at it Ireland has been dealt with, and, whilst Spain and Portugal may be problems in the future, it seems to me as though the worst is behind us here.

So on to number 2 — the rise in VAT to 20%.

Will the VAT rise damage the economy? I’m not convinced. Interest rates have remained low and the country did not fall about when VAT rose from 15% to 17½% last January. More to the point, consumers do not seem to be rushing out to buy big ticket items with frenzy, rather consumer spending continues to be driven by the calendar rather than “one off” events, which often only serve to increase business rather than distort it. Consumers have short memories and still have money to spend because interest rates are low. I think this threat is also being overplayed.

And finally, number 3 — Government spending cuts.

Again, the Press have been having a field day here, with big headlines about savage cuts. We have to remember that the cuts being introduced by the Coalition Government are going to be implemented over a four-year period. The media would have us believe that 25% of government spending is going to be cut on 1st April 2011.  That’s simple not the case.

So what’s the story. Well for me it simple. Don’t believe everything you read and be optimistic about the outlook for 2011, there is still business out there to be done and better times are on the horizon.

Wishing you a healthy and successful New Year.

Peter Black