London, UK. The Federation of European Employers (FedEE) reports .....
FOR IMMEDIATE RELEASE
Why the Bank of England is wrong
The Bank of England has just issued a forecast predicting zero growth this year – down from a prediction of 0.7% GDP
growth three months ago. But the bank continues to downplay the United Kingdom economy because it is basing it on the
wrong measure.
If you play conkers then you can recognise when someone is playing with stones rather than horsechestnuts. But what if
the game is about winning and not sport? The problem with measuring the performance of the United Kingdom economy
against the rest of Europe is that the Bank of England continues to regard it as a conker match and fails to see that
the UK is an aggressive performer which does not compete on the same terms as most other countries.
The UK is by far Europe’s single biggest exporter of foreign direct investment in the rest of the world. It is not
another Germany producing manufactured products or a country with a service economy largely based on retailing or IT
services. UK investments can be found all over the globe and it owes its success to a powerful financial sector. For
this reason GDP – which measures production within the confines of national borders – is not an appropriate measure of
UK success. We therefore need to look at real gross national income (GNI) which takes into account the proceeds of
foreign direct investments. And on that measure the performance of the UK looks very healthy – with significant gains
for the last two available quarters in a row and a 5.7% improvement since Q3 2009.
Yes, Germany continues to outperform the UK in terms of real GNI – but because Germany’s economy relies on manufacturing
it is necessary to offset the capital reinvestments required to maintain growth. On a net basis the UK economy is moving
at an equal pace to Germany and there is every sign that this pace of growth could continue – unless companies believe
the Bank of England and retrench.
Responding to the latest Bank of England forecast The Secretary-General of the Federation of European Employers (FedEE),
Robin Chater, said at a press conference today that “ a reliance on GDP as the only measure of economic performance can
be highly misleading and we must recognise that the world is far from the position it was in during the Autumn of 2007.
We are in danger of talking ourselves into a double dip recesson and the UK has certainly reaped additional advantages
in recent months from not being part of the eurozone.”
What is FedEE?
The Federation of European Employers (FedEE) is the leading organisation for multinational companies operating in
Europe. It was founded in 1989 with assistance from the European Commission. It is a corporate member organization
current Chaired by the HR Director of Ford Europe.
FedEE’s website is at http://www.fedee.com
ENDS