2012: A year of hopes - and fears
Outcome of the eurozone crisis will be the crucial factor in 2012, business leaders warn
Monday 02 January 2012
Rarely has a new year begun with so many opportunities and threats facing the business world. For Britain, there is a double dose of good news with the London Olympic and Paralympic Games and the Queen's Diamond Jubilee, which should boost the feelgood factor.
But consumer incomes are under intense pressure, retailers are hurting, and government budgets are being squeezed relentlessly. The fact the FTSE 100 is starting 2012 at almost exactly the same level that it ended in 2009 says it all. Britain could well be facing a second recession in four years after the 2008-09 slump – and things may even get worse if the eurozone cannot come to grips with its sovereign debt crisis.
The business leaders surveyed by our team of writers are almost unanimous in saying that the future of the eurozone is their greatest fear for the world economy. However, they also remain hopeful, focused on growth areas such as technology and emerging markets. There's nothing like a downturn for separating the winners from the losers.
Jim O'Neill, chairman, Goldman Sachs Asset Management
"The most important issue facing the world in 2012 is whether China can have a soft landing, in which inflation comes under control at 3-4 per cent and economic growth stabilises in a 7-8 per cent range. If it succeeds, it will have some success shifting the economy towards domestic consumption and away from exports and investment. This is key for China and for all the rest of us, given how exporting to China is becoming more and more important to us all, including the UK. My greatest hope is that China succeeds, and my biggest fear is that it doesn't. One has also to hope the eurozone crisis comes to an end at some time in 2012, not least as it is so exhausting for us all, and for UK policymakers, it will cease to be an excuse for everything that is going wrong in the UK. While the euro crisis is not good news for the UK, it is not the only thing that matters for our future prosperity."
Joanna Shields, Europe vice-president, Facebook
"From the Arab spring to the Occupy movements, people have used social technology during 2011 to mobilise against political and economic systems they believe to be increasingly dysfunctional, self-serving and out of touch. The means of communicating and connecting with one another continues to grow with unprecedented momentum, and it's because of this that I remain optimistic for 2012. Borders are fading and people are using social networks to share their opinions, ideas and views and to draw support from outside their villages, cities and even countries. What we urgently need to do in 2012 is work out how best to use these tools to tackle the most pressing problems: creating growth and jobs, improving education, revitalising communities. My hope for next year is that collectively we will start to create a more tolerant, participative and transparent society, with equal opportunities for all. My fear, of course, is that we don't."
Ian Cheshire, chief executive,B&Q parent Kingfisher
"The eurozone situation will continue to be a major factor in the early months of the year. But there are some positives, which should provide some relief for shoppers. Inflation should come down as the year progresses, interest rates don't look like they are going to rise any time soon, and the employment situation may stabilise during 2012. That clarity helps people plan ahead. The Queen's Jubilee and the Olympics should create a feelgood factor that should help consumer confidence. It will be a challenging year for retail, but the pain won't be shared equally. As retailers, we can't rely on our market to improve, so self-help will be the key. Anything else for 2012? A sunny Easter would be nice."
Dalton Philips, chief executive, Wm Morrison
"It's been a tough year and there are no signs that 2012 – or at least the first half of the year — is going to be any better. But gloom-mongering will get us nowhere, so here are the things I'm hopeful about: the politicians will find a way through the eurozone crisis (because they must), political instability will ease, consumer sentiment will improve and the economy will gradually begin to strengthen. I'm hopeful jobs will be created across the country (Morrisons plans to create over 7,000 jobs in 2012) and the cancer of youth unemployment is cut out. I'm hopeful that Britain's love affair with high-quality fresh food will continue (and that Ireland will win the Six Nations!). Consumers and businesses are being asked to carry a heavy burden, and I do worry sometimes that the load will be increased through additional regulation and taxation."
TRAVEL AND TOURISM
Steve Ridgway, chief executive, Virgin Atlantic
"2012 is the Olympic and Paralympic year for Great Britain, so I hope that it will be possible for the UK to be seen as an attractive destination for business and tourism alike. Currently, the unpalatable mix of ever-increasing air passenger duty, high visa costs and constrained airport capacity mean that UK plc risks losing millions in business and investment to its international competitors. At a time of extreme difficulty for the eurozone, the emerging markets will be of crucial importance. The aviation industry can develop our links with these markets in exports, overseas sales and by bringing new business to the UK. The Government needs to ensure the infrastructure and taxation systems are in place allow this to happen."
Simon Walker, director general, Institute of Directors
"The biggest fear for business in 2012 is the ongoing crisis in the eurozone. The EU is suffering from a lamentable failure of leadership. There is not a lot we can do about problems on the Continent, but we can focus on getting our own house in order. The Government has been right to show decisive leadership on the deficit, and 2012 must be the year that it sticks to the deficit reduction path. So we hope that the trade unions will see sense on what are very moderate reforms to public-sector pensions. Business also hopes that there will be action to improve our infrastructure, in particular transport and energy, with a key decision needed on increasing aviation capacity. Ultimately, we need to make the UK once again a world-class place to do business."
David Kershaw, chief executive, M&C Saatchi
"The biggest decision facing a UK business leader in 2012 is deciding whether you will accept being a 'macro-victim' or alternatively become a 'micro-aggressor'. Shareholders shouldn't be paying executives merely to accept it's grim out there and at best cut costs to compensate. In a macro gloom, what better time to go forth and pillage market share from lumbering "victims", to start new business streams using entrepreneurial talent (rather than raiding the balance sheet for expensive acquisitions), and to take great ideas and export them into more buoyant markets? Not everything will succeed, but you will emerge in much better health than the passive 'victim' and in these dark days, have a lot more fun."
Victoria Barnsley, chief executive and publisher, Harper Collins
"Revival of that fragile commodity, confidence, both in the consumer and the market, has to be a prerequisite to recovery. Top of my list of wishes for the new year will be a revival of the high street. In my business, James Daunt's ambitious turnaround of Waterstone's will be the barometer. Away from the high street, technology is opening up choices at a dizzying speed, offering readers an array of devices and ways to consume content in addition to the tried and tested book. I want to see a thriving, competitive marketplace with myriad players in both the digital and physical arenas. This will ensure that authors are well-rewarded and publishers can curate and expand choice while readers have access to affordable content in whatever format they want."
Roland Rudd, chairman, RLM Finsbury and Business For New Europe
"The biggest single issue facing the world economy is the survival of the euro. Its collapse would plunge us into a global depression, which is why Germany will not allow that to happen. Italy will not default as its new government implements reforms that Silvio Berlusconi refused to contemplate. Britain will not allow itself to be edged out of Europe as the Coalition finds a face-saving formula to re-engage. Barack Obama will triumph over the Republican pygmies and be re-elected. And finally Britain in Europe should use all its efforts to persuade South Africa to prevent Robert Mugabe from rigging another election in Zimbabwe."
Francis Salway, chief executive, Land Securities
"With the uncertainty surrounding the euro likely to continue and a risk of recession, it is understandable that UK plc enters 2012 in a cautious mood. With many corporates having strong balance sheets, the hope must be that we can get some stability in the outlook to allow these companies to turn their financial strength into decisions to invest. Investment by the private sector can be the catalyst for job creation. Since 2010, Land Securities have committed to a number of major developments which are supporting 14,000 jobs in construction and manufacturing. When you consider that we employ just under 600, it shows the power that big corporates can have across the country."
Colin Matthews, chief executive, British Airports Authority
"Generating jobs and economic growth will be top of every agenda for 2012. I hope Government recognises that for London to remain competitive we need great connections with markets such as India and China that are generating economic growth. In 2012 Paris and Frankfurt will have 1,000 more flights to the three biggest cities in China than London, and the cost to the UK economy of that missed opportunity will be £1.2bn next year. But there is still time, just, for London to re-establish its lead in Europe in its connections to India and China, and we need an aviation policy that recognises the role of Heathrow in supporting jobs and growth. Our focus remains making every journey through Heathrow better than the last and delivering a welcome to the Olympic and Paralympic Games that London can be proud of."
Ros Altmann, director general, Saga
"I really hope 2012 will be a better year for savers. 2011 was dreadful, with soaring inflation and rock-bottom rates, hitting anyone relying on savings income hard. I hope 2012 might see Government raising the ISA allowances to help. I fear the Bank of England may extend its policy of quantitative easing. Printing £275bn of new money, mainly to buy gilts, has been a disaster for pension funds, whose liabilities have ballooned as QE artificially depressed long-term interest rates. QE has not stimulated growth but it created inflation, which actually hurt consumer confidence and thereby weakened the economy. It also damaged annuity rates, so retirees buying an annuity now (nearly half a million people each year) will be permanently poorer for the rest of their retirement. I expect gilt yields to rise in 2012, as inflation stays too high and investors focus on the size of our deficits."
Nick Wilson, UK managing director, Hewlett-Packard
"My fears for 2012 are that we all talk ourselves into doom and gloom – and that we don't take every opportunity to look at positive growth strategies. It is a very tough market out there, but not all sectors are in the same predicament. There are some areas of growth. My hopes are that the UK puts technology on top of the stack as an enabler for business recovery both in government and across the private sectors. Areas such as cloud computing – experiencing 30 per cent growth – will help economic recovery. Technology needs to be a focus."
Patrick Coveney, chief executive, Greencore
"My fear for the food industry would be a perfect storm of weak consumer demand and further food price inflation, although I am quietly optimistic that this will be avoided by a return to some kind of sanity in the global capital markets. More broadly, I am extremely concerned by current attempts to alienate the UK from Europe and indeed the rest of the world which, to my mind, can only end badly. I am deeply impressed by the resilience of the UK consumer in the face of sustained challenges to their confidence and spending power. Hopefully we will see buoyant demand next summer centred around the Jubilee celebrations, Olympics and Euro 2012 football, with the resulting positive momentum driving growth for the rest of the year and beyond."
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