Global economic growth set to rebound Q4 2010

Nick Parsons, The Head of Markets Strategy at National Australia Bank (nabCapital) in London, made his forecasts for the global and UK economy at this year’s East Midlands Property & Construction Forum in Nottingham, predicting slow growth next year, and a peak of just 0.4 percent growth in the fourth quarter of 2010.

As guest speaker at this year's East Midlands Property & Construction Forum, organised and hosted by insurance and financial advisers The Wilson Organisation, PKF accountants & business advisers, and solicitors Freeth Cartwright LLP, he also warned of ‘no return to boom from the bust' in the wake of the UK's deepest-ever post-war recession.

A member of Sky TV's money panel and regular contributor to CNBC, BBC and Bloomberg News, Nick returned as the Forum's guest speaker for the second consecutive time; this year's event at The Nottingham Belfry, was attended by more than one hundred representatives of the East Midlands' property, financial and professional services sectors.

Mr Parsons explained the UK GDP had fallen a cumulative -5.6 percent, although official and survey data indicates the economy deteriorated at a slower pace in the second quarter of 2009. "We expect growth to return in Q3, accelerating in Q4, but only a very modest recovery in 2010," he said. "Indeed, growth in the whole of 2010 is likely to be only 1.0 percent."

On HM Treasury forecast, government borrowing is set to increase by £703bn over the next five years. "Global economic recovery and massive UK public deficit will put upward pressure on interest rates and bond yields, in the absence of any credible deficit reduction plan," he said.

"The Bank of England may cut the interest rate paid on commercial bank reserves - currently 0.5 percent - in an attempt to stimulate lending and maintain downward pressure on interest rates.

"The fall in Sterling means UK manufacturers have rapidly regained competitiveness, but an absence of overseas demand is still holding back output. The new trend of rate growth for the UK economy is likely to be 1.75 to 2.0 percent, almost a full percentage point lower than the average over the past decade."

Mr Parsons explained: "UK household debt is the highest in the world and the highest in history - debt to income ratio is more than double Italy's and more than fifty percent higher than France and Germany. The increase in household debt fuelled the housing market boom - economic growth closely follows the housing market; an increase in housing wealth allows mortgage equity withdrawal and higher consumer spending - recovery from the last house market decline, which followed the peak in July 1989, took nearly ten years."

Charlotte Prow, Managing Director of Wilsons comments: "The property and construction sector has been hit hard by the recession and the Forum presented a timely opportunity to hear from one of the country's leading commentators - Nick has more than 25 years experience in FX and global money markets - and benefit from the event's excellent networking opportunities."

Chris Holwell, Partner at Freeth Cartwright, comments: "With the first signs of recovery being seen in some sectors, it was useful for the key players in the property and construction industry to have the opportunity to hear a detailed forecast about the coming 12 months. Understanding the likely behaviour of the general UK economy in the short and medium term will be the key to making the right decisions in the property and construction industry."

Fraser Goodall, Partner at PKF, adds: "Clearly the property and construction sector is still continuing to experience difficult times and the event enabled delegates to receive a detailed synopsis of the likely recovery prospects which will be invaluable in assisting them to plan their business activity over the coming 12 months. We were delighted by the number of people attending."

The Forum, now in its tenth year, also featured Tim Richmond, non-executive chairman at Clegg Group Limited, as guest chairperson.