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The Economic Challenges facing the UK in 2016

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For obvious reasons, the British economy has endured something of a difficult time of late. This has resulted in a far less optimistic outlook for the UK, with the IMF having reduced the nation’s growth forecast by 0.9 percentage points in July. So while the British economy is expected to grow by 2.3% in 2017, this is far lower than previous expectations while the figure could also decline further in the months ahead.

3 of the Biggest Challenges facing the UK Economy in 2016

With this in mind, Britain’s economy is sure to encounter a number of challenges over the course of the next five months and beyond. The way in which these are surmounted will have a critical bearing on the near-term future of the UK, while also influencing the long-term growth potential of the economy as a whole. Here are some of the most pressing economic issues: –

A Slump in Manufacturing Output

While Britain may not be the capital of industry that it once was, manufacturing remains central to the nation’s economic engine. This sector still accounts for an estimated 52% of the nation’s exports, for example, while it also employs in excess of 2.5 million people. Birmingham firm R H Nuttall is also set to host it’s annual UK manufacturing awards for 2016, and in this respect you the industry is set to enjoy a celebratory summer.

This masks inner turmoil in the sector, however, with the markets recently opening lower as manufacturing activity nosedived after the EU referendum. The FTSE 100 fell by 15.32 points during this time, creating negative sentiment and the potential for a short-term recession. With manufacturing such a key, if understated, economic engine in the UK, this is something that must be addressed if the current levels of employment and overseas investment are to be maintained.

A Sustained Fall in the Value of the Pound

In truth, the UK’s current economic standing sits between two extreme perceptions. Nothing embodies this better than the value of the pound, which sunk to a 30-year low at the end of June and was expected to decline even further during the subsequent financial quarter. While this prediction has not been wholly accurate as the currency rebounded at the beginning of July, it has once again begun to fall steadily and dropped by a further 1% after a recent PMI report.

According to the analysis featured here, this trend is likely to continue for the remainder of 2016, particularly as the volatility and uncertainty that haunts the currency market remains Omnipotent. The challenge is to manipulate related economic factors such as interest rates and leverage these for an advantage, at least until the pound re-establishes itself in the market.

The Spectre of Austerity

One of the key economic issues at present is the spectre of austerity, which has underpinned recent attempts to curb borrowing. This has had a cumulative impact on regular households and middle-income families in particular, while it has also left an economy is desperate need of stimulus.

This will require a balanced approach to spending and borrowing, as money is invested wisely to benefit home-owners, consumers and employees nationwide. Timing is perhaps the most pressing concern, as this will have a critical bearing on the success of each measure taken and the long-term impact that it has on the economy.

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