Weak pound and strong manufacturing demand likely to lead UK toward winter recover, economist predicts

In a plenary session titled The Economy – Where are we now and how did we get here?, Mr Spencer, of the University of York, said the bailout had paved the way for a shorter and less dramatic breakdown than might have occurred in the financial sector.

He said: “The efforts the government made to stabilise the financial system appear to have worked, and although the economy is still weak, it is no longer in freefall. We are not yet at the bottom, but we are at the point of inflection and the falls are getting much, much smaller.”

“Had the banking system collapsed, we would have been in very serious trouble. We can now look towards a recovery this winter.”

"In the manufacturing world, output has fallen faster than demand, so when recovery happens, we will be in a good position to rebuild and a V-shaped recession is more likely. In addition, the weak pound means that we will be in the lead when the economy picks up as the UK will be attractive for tourism and trade.”

Mr Spencer said that the credit crunch had highlighted the need for widespread saving through pensions and other avenues, and the dangers of excessive lending.

He said: “We can’t go on the way we were. We have to adjust as an economy and can’t go on borrowing in the way we were, with 125 per cent mortgages. We have to adjust as an economy and can’t go on borrowing in that fashion. It is terribly important that we get savings rates up for retirement and that has implications for pensions and actuaries. The pension system, like everything else, was hit by the collapse and weakness in the economy and in the long-term we need to repair the damage by changing our attitudes to saving and lending.”

The Pensions Conference is at Queens Hotel in Leeds on 3, 4 and 5 May.

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Enquiries: Tel. Fleur Morrison on 020 7632 1453 or email fleur.morrison@actuaries.org.uk

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