Five predictions for the economy and what to do about it

Roger Martin-Fagg made five predictions for the economy at the AEO Conference 2008. This is the Client Director Henley Management College economist who has made many gloomy predictions in the past and said at the same event last year

there has been a huge party and we lost our senses. Now for the hangover.

But it was not all gloomy. Martin-Fagg also came up with suggestions as to what to do about it. First the predictions.

1. UK economy to remain in recession until end of 2011 and the US until the end of 2010.
2. UK economy to shrink by 6% over next three years or £50 billion.
3. Asian economies to suffer far more they had imagined.
4. UK banks to go to government for £60 billion of further funding by next summer, effectively nationalising them.
5. UK savings ratio already going back up but needs to get to +4%. Each 1% represents £7 billion out of the economy. 

What to do about it?

1. “Take market share by being distinctive”. Expensive, top end and cheap, bottom end will do far better in any business sector. It is those in the middle who will suffer.
2. “Invest in anything to do with old people”. Care homes, drugs for the elderly.
3. “Invest in new kit”. Any company with money should continue to invest, particularly in innovative, new technology.
4. “Don’t drop your prices, rather introduce small price increases”. Keep your margins up and put any price rises down to exchange rates or whatever.
5. “Only start buying assets again when people still don’t think that we have reached the bottom of the recession”. He suggested not for another 18 months at least.