19/12/2014

By Roger Martin-Fagg Economist and Member of Vistage


Despite a predicted drop in the growth rates for next year, the UK economy is set to look healthy and sustainable in 2015.

Growth rates are predicted to fall from 3.1% to 2.3%. While a drop in 0.8% growth is suggestively disappointing, the 2.3% is a realistic rate for a sustainable economy to grow.

Indeed, a rate of 2.3% is perfect to help the economy continue to grow viably and continuously. If the economy continued to grow at 3.1%, there would come a painful reckoning and so a reduction is both to be expected and mutedly welcomed.

This would make 2015 a moderately good year for SMEs, continuing on from the past two years of strong growth. It is good that the economy eventually bounced back strongly after the financial crisis and recession.

SMEs that export will find that the picture is vastly different between regions. The US is, like Britain, growing at its expected 2.8%. But the Eurozone is predicted to stay stagnant at 0% and China’s growth will be slower at 5%. This will have an impact on international growth and those British businesses that trade with these countries.

At home, low inflation and modest wage growth will be bolstered by falling oil costs - meaning lower petrol pump prices resulting in customers having a little bit more to spend on extras. A lower price of petrol is good news for businesses with high transport costs.

The UK economy is currently a success story, partly due to the sustained investment undertaken by SME’s during the recession. But there are many risks and dangers facing the world economy: the dramatic slowdown in China plus rising dollar interest rates which will hit many emerging economies hard, and create volatility in their exchange rates.

So while the worry is not yet over, most British SME owners should be positive about their business's prospects. Planning for 2015 should be ambitious. But it is wise to have flexible plans just in case problems from the rest of the world start to have an even greater impact.