As the UK grapples with rising interest rates and the cost of living crisis, the World Bank has issued a warning that we could be mired in a ‘lost decade’ for global growth unless policy makers make drastic changes to boost investment, productivity and labour supply.
A report from the global lender highlights that nearly all the economic forces that powered progress and prosperity over the last three decades are fading, a situation underlined by demographic factors such as the ageing population and exacerbated by macro-economic factors such as the Covid-19 pandemic and the war in Ukraine.
The World Bank forecast that between 2022 and 2030 average global potential GDP growth is expected to decline by roughly a third from the rate that prevailed in the first decade of this century—to 2.2% a year, down from 2.6% in 2011-21 and 3.5% in 2000-2010.
“A lost decade could be in the making for the global economy,” said Indermit Gill, the World Bank’s Chief Economist. “But this decline is reversible. The global economy’s speed limit can be raised—through policies that incentivize work, increase productivity, and accelerate investment.”
Call to tame inflation and reduce debt
The World Bank has called for a concerted effort at a national level to tame inflation, ensure financial sector stability, reduce debt, and restore fiscal prudence. The report recommends:
- increased investment in areas such as transportation and energy, especially aligned with key climate goals
- cuts to international trade costs
- a greater focus on the professional services sector as an engine for economic growth, in particular information and communications technology, and
- initiatives to increase overall labour force participation – about half of the expected slowdown in potential GDP growth will be attributable to changing demographics, including a dwindling working-age population.
In a Wall Street Journal article, economic reporter Harriet Torry pointed out that: “Over the past year, governments around the world have announced tax breaks, subsidies and new laws in a bid to accelerate investment, combat climate change and expand their workforces. That might not be enough.”
The impact on UK business growth
For UK business owners and directors, it’s hardly news that we are facing an exceptionally tough period for business success and growth.
Battered by strikes, tightening lending requirements and cost of living pressures, the UK grew weakly in the first quarter of 2023. According to ONS figures, the economy grew by 0.1% between January and March and lags behind other major economies such as the US, France, Italy, and Canada.
Business insolvency is rising. There were more than 22,100 company insolvencies registered in England and Wales in 2022, the highest number since the end of the recession in 2009 and 57% higher than 2021.
As licensed insolvency practitioners and cashflow solutions specialists, we are seeing an increasing number of business owners, directors and CEOs seeking objective, expert advice about protecting their cashflow and keeping their businesses solvent.
Despite the obvious stress of dealing with mounting debt or a potentially insolvent company, we can’t emphasise enough how taking a proactive approach as soon as possible increases your options and improves tax considerations. Once there is transparency and full awareness of financial issues, then measures can be put in place to protect your business – or, alternatively, to deliver the best possible outcome for all stakeholders if it’s clear that the business cannot remain solvent.
If you need confidential expert advice on cashflow problems or business recovery, contact us today for a free, no-obligation consultation.