Scary Movie 5 - the UK Economy

In recent years, Business teachers have had a hard time trying to make the economics elements of the business curriculum interesting and relevant. Not any more…its a horror show

A “horror show”. Thtat’s the view of economic forecasters Ernst & Young Item Club in their most recent assessment of the prospects for the UK Economy. ITEM is forecasting that the economy will struggle to avoid recession in 2009 with predicted GDP growth of 1.0%. It expects inflation to remain above the target range of 1 to 3% for the next 12 months and there will also be a substantial increase in the numbers of unemployed.

Ernst & Young’s deeply pessimistic view on the economy is also shared by Prof David Blanchflower, one of the nine members of the Monetary Policy Committee of the Bank of England. Blanchflower has taken the slightly unusual step of giving an interview with the Guardian where he criticises his fellow MPC members for failing to cut interest rates.

So what are the implications for business students accustomed as they are to year after year of steady economic growth, low inflation and low unemployment?

I suppose the key thing to encourage them to do is to keep informed about how the economy is changing, and how the slowdown affects different industries in different ways. There are few industries immune from a slowdown in consumer spending or lower business investment However, even in a tough market, there are still winners and losers. It just becomes harder to make money & tougher to grow sales.

It might be worth taking unemployment as a focus.If ITEM and Professor Blanchflower are correct, we can expect to see many announcements of major job losses in the weeks and months ahead. Which industries are these in? Is it just the housing market or financial sevices sector that are taking the brunt of the slowdown? What stories lie behind the job losses. Painful as it is, it could also be worth tapping into the personal experiences of students. Have their friends or family suffered a redundancy or pay cut?

Who knows how long the slowdown will last, or how severe it will turn out to be. However, for Business teachers and their students, the economy just got interesting again.