Economy

Global economic outlook

The world has yet to see a sustained recovery from the 2008 crisis. Growth in the Eurozone has remained flat over the past year, with persistent sovereign debt crises in Europe's southern periphery reducing investor confidence. While the performance of emerging markets remains stronger, a slowdown in China's growth reflects weak global consumer demand.

Looking ahead, most forecasters anticipate growth in Europe and the United States will remain very fragile in 2012, with below-trend growth sustained into 2013.

UK economic outlook

Growth in the Eurozone – Britain's largest trading partner – is key to the future performance of the UK economy. However, reflecting international difficulties, further contraction of -0.2% is expected in 2012, with a return to growth of 1.3% anticipated in 2013. Whilst sustained growth remains a national priority, the government's ability to increase output remains constrained by continued pressure to reduce public debt.

Despite this challenging outlook, Britain is increasingly seen as a safe haven for investment, retaining a AAA credit rating and a relatively attractive tax and regulatory environment. Interest rates remain at historically low levels, the inflation rate is stable at around 2.6% and unemployment is below the levels of previous economic downturns and the Euro area average.