Politics expert Dr Steve McCabe discusses the current state of the UK economy, with analysis on when the country may see better circumstances.
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00:00Well, there is no doubt that the budget has been the contributing factor to a sense of
00:06uncertainty amongst businesses, and indeed the national insurance for employers is not
00:11going to kick in until April, but many large businesses are already taking pre-emptive
00:16action, are cutting down on investment, and certainly not taking on people. This is translating
00:22into a general sense of bigger uncertainty amongst people, and indeed there are many
00:27people who believe that the Rachel Rees budget will prove to be a big problem for the Labour
00:33Party going forward, and they'll have to do some remedial damage to make sure their opinion
00:39polls start to creep up, because they're looking pretty dire at the present.
00:43When might people start to see an improvement in their financial circumstances?
00:47Very hard to say. What we can say is that interest rates are likely to come down, but
00:53of course it's probably going to be a slower rate than was being predicted a couple of
00:56months ago. Energy costs are going up. That feeds into the general cycle. Food prices
01:02are not going to come down, so I suspect that people are going to feel no better off. The
01:06only good news is that average wage rates are going up, therefore people might be marginally
01:12better off, but the general sense at the moment is that people are going to feel worse off
01:17than not better. Now of course that's a problem at the moment, but of course it becomes a
01:21political problem come the next election, which of course is what all political parties
01:25are interested in, and voters have a nasty habit of punishing the party that's in power
01:31if they feel worse off than when that party came to power.
01:35So is a recession likely in the not-too-distant future?
01:39Well remember, a recession is two successive quarters of negative growth now, because that
01:44can be very marginal, and there is a strong suspicion that may happen. This is what's
01:49known, if you like, as a technical recession. In the short term, I suspect that things are
01:53going to get worse before they get better, and the question is being asked, will they
01:57get better? And nobody really knows.