Speaking at the CFO Summit in Warwickshire, David Gabay, chief UK economist at JP Morgan, the investment bank, said the global economy is currently weaker than at any time in the past ten years.
He said: ‘Recovery will be held back by sluggish profit growth, an on-going tech adjustment, and limited policy response outside the US.’
The economist echoed the views of CBI chief Digby Jones and Maurice Fitzpatrick of Tenon when he said the key concern in the UK was whether the recession, which has primarily hit the manufacturing sector, would spread to the service sector.
Gabay said the fact that manufacturing is in recession was not in itself worrying because it represents a relatively small proportion of the UK’s GDP. But in the context of the wider economy it is of concern as much of the service sector is dependent on demand from manufacturing.
Breaking away from the poor global forecast, Gabay said there were reasons to be cheerful in the UK because it is currently one of the best performing economies in the G7, with high employment and low recession.
According to Gabay, recovery from this downturn would be slow and ‘banana-shaped’ and is unlikely to be led by the high-tech sector – blamed for the current global economic gloom.
The latest figures supplied by the CBI and Deloitte & Touche show the wave of economic gloom having spread beyond manufacturing into the service sector, with professionals having the most pessimistic outlook of the business climate in almost three years.
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