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Accelerating Growth in the
Digital Age
Do we need growth?
Where might it come from?
September 2014
James Sproule, Chief Economist
Institute of Directors
[email protected]
@jamesrsproule
UK economic forecasts remain too calm
Economic forecasts have a strong tendency to underestimate volatility
 Consensus estimate real trend rate of UK growth to be ~2.0%
 Disaggregating consensus does not significantly raise forecast volatility
Conclusions
 Look to economists for a trend
 Any trend forecast has to stack up with expected changes that can be observed
(demographics etc.)
UK GDP
(HM Treasury consensus survey forecast)
8%
6%
4%
2%
0%
GDP
-2%
Consensus Aug 2006
-4%
Consensus Aug 2009
-6%
Consensus Aug 13
2014
2012
2010
2008
2006
2004
2002
2000
-8%
2016
Forecast
Consensus Aug 14
Source: ONS, HM Treasury Consensus
UK – Working Age Population
+ Productivity FORECAST
• Demographics are set to flatten over coming decades and at times WAP will fall.
• Assuming productivity increases of last decade can be maintained, GDP outlook
can be assumed to follow a similar trend to that set out below.
UK: WAP + Prod FORECAST
(1960 = 100)
600
550
500
450
400
350
300
Pop+Prod
250
GDP
200
Pop+Prod FCST
150
100
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
2060
Source: ONS, UN Population Database
Wither Globalisation?
Developed economies remain under
significant pressure
Macro Economic
Pressure
•
•
•
Recovery
progressing, but
dangerous
disruptions still
loom
Tax yields have
peaked
Monetary policy
remains
emasculated
Political
Pressure
•
Tactical populism
tempts
Change and a reordering of
priorities will be
resisted
Politicians face
trust issues
•
•
Consumer
Pressure
•
•
•
Consumers show
little or no loyalty
More product for
less money is now
the expected
normal
Many businesses
face consumer
trust issue
Future Trends
•
• Premium on Agility
• Business will lead politics
Technology needs fertile ground to flourish
New Technology
Pressure
•
•
•
New technologies
allow for lower cost
production and
distribution
Analytics
necessary to
remain relevant
Market
commoditising in
face of need to
invest to compete
Technology
Five trends pointing one way…
• Technology is difficult to predict
• Chaos theory suggests that unknowable linkages can lead to
unforeseen outcomes
• Technology is even more difficult to order
• Some promising technologies have been promising since the 1970’s
• Cost of computer power continues to fall
• Rate of growth may well be slowing
• Adoption rates of technology are steadily increasing
• Good ideas are able to spread faster than ever
• Technology is increasingly a social force
• Allows many peripheral relationships to grow virally
Technology driver: rising capacity & falling costs
Evolution of Computer Power / Cost
Source: MoCom 2020
iGDP – per cent of economy
attributable to the internet - 2012
Source: McKinsey
Total Early Stage Entrepreneurship
Source: Global Entrepreneurship Monitor
New Business Ownership Rates
Source: Global Entrepreneurship Monitor
Conclusions
• Economic growth matters – a lot!
– Economic growth allows old industries and old technologies to be phased out and shut down.
• Growth is going to be driven by consumers and hindered by politicians
– A lot of people are scared of the future
• Barriers to starting a business have been falling
– Agility is key: information overload is endemic, so what really matters?
• Think outside the box…
– Human ingenuity can fix most problems and will avoid the others