Growth in the emerging markets rose strongly, and the developed world was pulled out of a recession, with varying degrees of success. Any country selling goods and services to the Asian and emerging market economies has recovered strongly, while those countries orientated towards the developed world have continued to struggle.

Indeed, the US has struggled so much that it has embarked on a second round of quantitative easing (QE2), as well as extending a number of fiscal policies over the next two years with a combined worth of $1.4 trillion. Despite all of this, one in five Americans is still dependent upon the Government to feed them.

In the UK, the full impact of the Government’s tax hikes and spending cuts has yet to be felt. While these may be painful for some, the reality is that it is only the real value of the expenditure that is reducing. In absolute terms, total expenditure is still rising.

The financial position of the UK will only improve if the UK economy grows over the life of this Parliament. The projected rates of growth in GDP are 2.1% per annum in 2011-12, rising to 2.8% per annum in 2013-14.

The main driver behind the projected growth is our ability to sell more goods and services into a global economy, which is set to expand over the coming years. In theory it’s a great idea, but in reality it is more challenging.

Ideally, we should be selling goods and services to the developing world, but we are still orientated towards the developed world, where economic growth rates are more modest.

Like the naval defences in Singapore, where the guns were pointing in the wrong direction and, therefore, unable to fire during World War Two, our existing markets are not pointing in the right direction for growth. We currently export more to Ireland than to the whole of China, India and Brazil combined.

These strategies of the past are creating a challenging environment. There is increasing evidence that while the inflationary policies of two years ago helped the majority of businesses, we are entering a period where the difference between the winners and the losers is increasing.

This is all taking place against a background where banks are applying restrictive lending policies. Effectively they are happy to lend to those businesses that do not need debt, but will often turn away companies that do.

Ultimately, there is no easy exit route for the UK economy, but the opportunity exists for businesses to take advantage of the current climate by pointing their guns in the right direction.

For further information contact Mark Garnett on 01483 407163.

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