Predictions for 2013

We are now at the end of 2012 so what predictions can be made for consumers, business, and the economy in 2013?

Getting around.

Transport congestion will probably continue to increase as car ownership has risen despite average mileage having fallen. The UK has a growing population that is very car dependent, so rising fuel costs, increasing insurance premiums, deteriorating roads arising from public spending cutbacks and parking fee increases will not please the average motorist.  The downward trend in the average-mileage per driver will probably continue since we now buy more online and we go out less. However, increased car ownership will make parking near our home more difficult.

There is a shortage of airport capacity at London Heathrow and trains are often overcrowded at peak times. It is difficult to increase the supply of these services quickly, so unless investment decisions are made soon, the situation will worsen over the next few years.

Buying consumer goods

More online shopping and lower than inflation wage increases means there is more pressure on our high streets. We simply do not have the disposable income we once had. Rather than cut back on food, we will eat at home more and do without discretionary items. Those families seeing their discretionary spending disappearing, will look at whether they can buy cheaper items of food.

High streets will need to adapt and that might mean changing the building use from shops to offices and accommodation, which is preferable to having so many empty units.

Demand for the latest technology may well hold up since prices of items of technology have come down. While technology prices may increase below the rate of inflation, other goods will see higher than inflation increases. Energy bills are likely to continue increasing as incomes of people in the BRIC group rise and they own more cars and more electrical products.

Housing

The strain on housing is caused by an increase in demand through a rising population and change in family structures. At the same time supply of housing is limited by the reluctance of builders to develop on land they already own, because the builders of concern about their ability to sell property. However the housing hotspots where business is growing such as in the South East of England contrast with many areas seeing a decline in house prices reflecting other inequalities that have been exacerbated by the recession. The overall effect is to create an even bigger north-south divide.  

Jobs, pay and moving between jobs

The domestic market remains sluggish, yet the number in work increases. Between July and October 2012 the numbers in full time employment rose by 44,000 and those in part-time work fell by 4,000, so that now nearly 30 million people have work in the UK. Clearly some businesses will be growing and taking on new recruits. Perhaps other businesses are not letting go of their staff as they might have in previous recessions because real pay is falling making it cheaper to keep people on. These employers will be gambling that the economy will grow soon and quickly. If it doesn't then they will be forced to release workers when the public sector employment will face another round of cuts.

A flexible labour force means that people will move fairly easily between jobs. If job vacancies are declining and the number of applicants per job is increasing then it suggests that people in employment will find it more difficult to move and those without a job will find it harder to compete with those who are economically active. This could lead to an increase in people who are unhappy in their job, but stick with it because there is no alternative. Secondly those looking for work will accept a lower grade job relative to their qualifications and experience as they are pushed down the jobs ladder.

Is this a good thing because employers have more able employees on lower grade positions or a bad thing because the economy is not using labour to its full potential?

The economy

The economy in 2013 faces continued pressures. The Euro area will possibly see a small contraction. Domestic demand remains fragile and remains very difficult to reduce government debt. On the up side the supply of oil is likely to rise which should ease the inflationary pressure. This, along with higher tax thresholds, could increase disposable incomes and therefore demand for discretionary goods. A new confidence may filter through to business investment. Whether the economy actually thrives or not, there will continue to be a smaller role for the public sector and consequently less protection for the more vulnerable citizens of the UK.