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SPEECH TITLES

The outlook for 2014 and beyond

David Smith

JLA Client Comments

Q&A

JLA: What shape do you expect recovery to take?
DS: I expect a V - but we need to distinguish between 'statistical' recovery and how it's felt by businesses and ordinary people. Recovery always takes much longer to be discernible.

JLA: How and when will we know QE has worked?
DS: We already know it has, from better conditions in financial markets, the fact that inflation did not go negative and a rise in 'money' GDP - as opposed to real GDP. However, it will take longer to feed through to credit growth.

JLA; Could a Tory government speed up recovery?
DS: Yes - not so much in terms of policy but by drawing a line under a grim period and exuding energy and ideas. What the market fears most, as do officials, is a hung parliament with post-election wrangling damaging confidence.

JLA: What are the key indicators of sustainable recovery?
DS: The ability of the economy to keep growing, measured by GDP and business surveys, as emergency support is withdrawn. A good sign will be that the Bank feels able to raise rates - as long as it's not forced into doing so by the markets.

JLA: What has this recession taught us about globalisation?
DS: That it cuts both ways. It will continue to create enormous opportunities, but there's also a destructive power of markets linked across borders, and the dangerous spread of risk.

JLA: Can we learn from Canada in controlling public spending?
DS: Canada made 20% cuts over three years, and the ongoing controls served them well during the crisis. We've allowed spending to rise sharply, focusing on 'inputs' (extra cash), rather than 'outputs' (results). Canada's collegiate approach to cuts is badly needed.

JLA: Which sectors are most likely to provide the engine for growth?
DS: Manufacturing may do surprisingly well if the exchange rate remains competitive. However a lot of the growth will come from things we barely know about; nobody would have predicted internet-linked activity helping us recover from the last recession.

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