Bad News for the UK from the OECD

The OECD have today warned that the UK economy will contract marginally in Q4 of this year (by some 0.1%) and will further fall in Q1 2012 (by 0.6%) and so enter a second period of recession.  See OECD predicts recession for more details.

Clearly the Ezone crisis will have a decisive role in the OECD downgrade, but it is also clear that the Chancellor has been following a high risk policy approach at a time when high risks are to be avoided.  His main risk is of front loading spending cuts during the Parliament as the central plank of his fiscal consolidation plan.   At a time when the private sector has been finding it hard to regain its growth momentum, the huge cuts in public spending are expecting businesses to find even more ways to expand to make up for the cuts.  Not only do they need to find sales to make up for what they lost in the recession, they have to make good the loss of spending power in the economy driven by spending cuts.

Should this come as a shock that has been brought on by feckless management of the EZone crisis?  Well, not really.

India in transition

I have just returned from a short business trip to Mumbai, India.  The client is a domestic bank with a short history but impressive plans to grow within the Indian retail market.  I must say the relationship has taught be much about what in the West is often described as an emerging market – frequently with little knowledge beyond hearsay behind the realities of the situation of the economic prospects for the country.

I return from this assignment with one major impression of the warmth and energy of the senior management team.  They were open to new ideas and generous in their hospitality.  They are proud in the achievements of their country: proud too of the contribution they can make to its continued growth, development and increasing prosperity.  It is a welcome evidence of pride not just – as they said – in ‘the money’ but in the economic welfare of the economy.  Something that does not seem to pervade the wider global banking industry at present.

A second issue that surprised me was