UK employers have reasons to be cautiously optimistic despite the unprecedented economic challenges facing the world’s economy.
Graeme Leach, chief economist at the Institute of Directors, told delegates at the HR Forum that there were no economic models that capture the current state of the economy.
The combination of the impact of the war in Iraq, the stock market’s rapid boom and bust and what Leach described as “synchronicity” - a simultaneous downturn across all the worlds economic regions is unique.
Leach explained: “In the early 1990s the US was weak but the Europe’s economy was boosted by the unification of Germany and Japan was still going strong.
“In the late ’90s when Germany and Japan slowed the US recovery came on stream strongly.
“At the moment Japan is going nowhere Europe is stagnating and everybody is looking to the US economy, but that is still weak. As a result I think we are in the middle of the most uncertain economic period for 50 years."
However Leach said that there is good news amongst the gloom. The US economy seems to have fended off the worst effect of the stock market boom and bust and was suffering only a what appears to be a shallow recession.
Leach said swift end to the war in Iraq is another reason to be cheerful from an economic point of view because of the subsequent drop in oil prices.
“The UK is also better placed than most countries. The monetary policy committee still has plenty of scope to cut interest rates. I think we can muddle through in this country during 2003 which is no mean achievement considering the body blows, which have hit the world and UK economy,” he said.
Leach is optimistic employers will not have to make significant redundancies and will benefit over the coming months from a gradual improvement in trading conditions.