The Public Spending Crisis and Other Economic Factors: How will they Impact on Investors?

After more than eighteen months of almost continuous growth and regeneration, the UK economy has begun to stagnate considerably. With labour market figures in decline and house values plummeting nationwide, the third financial quarter recorded poor economic data and set the scene for a challenging festive period. To compound matters, Britain’s public sector finances have also taken a turn for the worse, meaning that the government may once again be forced to borrow to balance the books.

 

investThe Fact and Figures: What does the Latest News mean for Investors?

According to the Office for National Statistics, the UK borrowed £11.8 billion in September, which is 15% (or £1.6 billion) more than the same period in 2013. This level of borrowing is worrying, as it suggests that the recent economic growth and recovery was based on unstable foundations that cannot sustain long-term expansion. Such numbers also take the UK further away from their 2014-15 borrowing goal, which stood at considerably less than during the previous twelve months.

In addition to this and similar economic problems, the British government have also been forced to battle the negative impact of the Ebola disease. With the SPI Sanlam blog reporting that the rate of air travel has already fallen 9 and 18% across all national airlines, there has been a significant drop in tourism revenue during the third financial quarter. In terms of the private sector there has also been a fall in investment and trading volumes, as while some stocks associated with protective clothing may have experienced gains others have fallen considerably since the announcement of the Ebola outbreak.

 

The Bottom Line: What Rising Borrowing and other Factors mean for Investors

These factors have arisen quite quickly, and their cumulative impact has decimated economic growth in the UK. This has created a bleak and uncertain economic future, which in turn has encouraged investors to adopt a risk-averse approach and consolidate their finances until they are presented with a longer-term outlook.

While factors such as the Ebola outbreak are expected to be managed over time, however, issues such as public borrowing can be extremely difficult to control. Periodic borrowing can often become more frequent throughout the course of the financial year, for example, as governments are forced to take out more in a bid to balance the books and repayments. This is extremely worrying, and something that the coalition must look to control if we are to avoid a recession in the near future.

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About Dequiana Jackson

Dequiana Jackson, CEO of Inspired Marketing, Inc., is a small business marketing coach who teaches women entrepreneurs how to monetize their message so they can make more money from their expertise. Dequiana is the author of Know Your Business: How to Attract Ideal Clients & Sell More and runs the award-winning blog, Entrepreneur-Resources.net.

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