• Strategic Analysis: UK Political Environment 3

    Posted on January 26, 2011 by in Strategic analysis
    Houses of Parliament

    UK Houses of Parliament

    Just over six months ago, in another strategic analysis post, this blog questioned whether the new Conservative-led administration would drive the UK economy towards a double-dip recession.  The question was influenced by the coalition forcing through the expenditure cuts they had campaigned on, but which had failed to secure enough support to win a majority at the general election. There are serious democratic issues here that are beyond the scope of this blog, but the Office for National Statistics (ONS) data for the economy that showed GDP shrinking in Q4 2010 is an early sign that these fears may be realised.

    The reaction of the coalition government was to dismiss the data as an effect of either the weather or statistical anomaly.   Again, it is too early to tell, but given that they mistakenly, and brazenly, claimed the economy was in good shape in Q3 due to their macro-economic decisions in the preceding weeks, their track record for accurate strategic analysis is questionable.

    The recent criticism of the cuts agenda by the CBI and ILO suggests that the support of business leaders for spending cuts that they trailed during the campaign last year may be wobbling.
    If the shrinkage in GDP is confirmed for Q4 2010 and repeated in Q1 2011 we will officially have entered a double-dip recession in less than a year; the mere possibility of which is hard to accept. Maybe the next spending cut will be to abolish the ONS and get the next set of figures from the ‘independent’ Office for Budget Responsibility instead? Statistical analysis is fine as far as it goes, but data has to be interpreted to gain anything meaningful, so we need good strategic analysis of the macro-economy to enable businesses to develop their long-term plans.

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