Friday, 31 January 2014

UK Economic Growth Forecast on the Rise

The International Monetary Fund (IMF) has sharply raised its forecast for the rate of UK growth this week. What does this mean for the industry of business acquisition?

The IMF released its current forecast of UK growth this week and it significantly outmatched previous expectations. It has now stated that it expects the UK economy to grow by 2.4% in 2014. The previous figure suggested was 1.9%, meaning a rise in expectation of 0.5%.

This wasn’t the only figure on the forecast of UK growth the IMF released. They also released an expected figure of 2.2% for 2015, which if these figures prove correct would only be a drop of 0.2%.

Notably the organisation put global economic growth for 2014 at 3.7%, slightly higher than it has previously predicted. It also released its figures for the world’s largest economy, the US, 2.8%, which is a 0.2% improvement from the figure it quoted back in October.

The report also provided figures for two key economic areas; the Eurozone and China. The Eurozone together is predicted to grow by 1%, a significant figure considering the trouble the continent has faced over its finances in the past few years. It measured China’s economic growth at 7.5% a figure that’s expected for the world’s largest growing economy.

These figures are telling. The whole world is set to grow this year, however the rate of British economic growth is particularly strong. An article for the BBC on the subject reports a statement made by the Treasury on the news.

It said that "[The IMF] report provides further evidence that the government's long term economic plan is working." However the spokesperson also noted that the job is “not yet done” and that “the government will go on taking the difficult decisions necessary to deliver a sustainable recovery for all."

This rising confidence in the expectations of the UK market has come from several factors. Unemployment is decreasing, the manufacturing and retail industries are enjoying strong growth and inflation has fallen into line with the government’s 2% goal.

At RTA Business we see this as a sign that buyers will be much more hospitable to the idea of buying a business. After all, more economic growth means more opportunity. When you’re looking to capitalise on that opportunity, you look to see how buying a business would help you do so.

Monday, 20 January 2014

Global Economy Hits Turning Point

The World Bank has announced this week that the global economy is at a “turning point” in the face of stronger global growth forecasted for 2014. What does this mean for the industry of business acquisition?

RTA Business has learned that this week the World Bank, the overarching global banking regulator, released a report on the state of the global economy. Specifically it highlighted forecasts stating that richer countries are “turning a corner” in the wake of the damage caused by the financial crisis.

This is expected to have a knock on effect on developing economies, as strengthening western finances should facilitate stronger investment.

However the World Bank warned that growth prospects in such economies “remained vulnerable“ to the expected ramifications of the withdrawal of the economic stimulus package by the US Federal Reserve.
The stimulus package was a programme set in place by the US Federal Reserve to shore up the country’s economy in wake of the 2008 financial crisis. It involved bond-buying and aided in the development of emerging economies such as India and Brazil.

However, stronger US job growth saw months of speculation on when the scheme would be tapered back; this had ramifications on markets across the world. Now the Reserve has started scaling back its monthly bond-buying scheme, which was formerly set at $85bn (£52bn) a month. This has caused fears that it could see global interest rates rise, which could alter the flow of money in and out of emerging markets.

In an article for the BBC World Bank group president Jim Yong Kim commented on the affects this could have. He commented that "growth appears to be strengthening in both high-income and developing countries, but downside risks continue to threaten the global economic recovery."

He elaborated on this, saying that "the performance of advanced economies is gaining momentum, and this should support stronger growth in developing countries in the months ahead. Still, to accelerate poverty reduction, developing nations will need to adopt structural reforms that promote job creation, strengthen financial systems, and shore up social safety nets."

So what does this mean for the industry of business acquisition? A strengthening economy naturally means that more people will be willing to sell their businesses as prices rise. This will lead to a stronger, more robust market. These suggestions, if governments decide to set them into place, could also foster a more beneficial environment for business acquisition.

What has been clear for a while is that the world is moving out of the Great Recession and into sustained recovery. However in order to sustain this recovery we need to be cautious.

Friday, 10 January 2014

Is The Source of Retail Economic Growth Shifting?

A survey released this week suggests that the UK experienced a record amount of online shopping this Christmas. At RTA Business this has made us question whether the source of retail economic growth is shifting online.

Retail has always formed a major element of economic growth. This is one of the key reasons politicians give when they attempt to slash taxes; that more income means more spending which means more cash injected into the economy.

Furthermore this is a tactic governments and big business themselves use when attempting to shore up the economy and rescue their profit margins. Following the 2008 economic crash the government developed several schemes such as Help to Buy and the Green Deal designed to inject fresh cash into flagging markets.

Christmas is the Superbowl of shopping. The commercial nature of the season, the idea of gift giving, inspires the general public to shop. Businesses know this, and as such ad campaigns and special offers are put in place like never before.

However this last Christmas revealed some surprising details. Retail giants such as Sainsbury’s, Morrison’s and Tesco sold significantly less than usual during the lucrative season. Considering that many of these large retailers make a significant portion of their profits at this time, this is a somewhat worrying conclusion.

However online sales were stronger than ever this Christmas. Overall there was a 19.2% growth in the rate of internet purchases over the Christmas season. In contrast UK retail sales rose by just 0.4% on a like-for-like basis.

In more detail; online shopping accounted for 18.6% of the total of sales not involving food in the closing month of 2013. This was an almost 2% increase from 16.5% in 2012.

The survey was conducted by the BRC and the group’s Director General Helen Dickinson spoke to the BBC on what their results could mean. She said that "this Christmas we've seen innovative retailers using click and collect and other approaches to make a virtue of both their website and their physical shops. And that's something we see growing in importance."

At RTA Business we understand the point Dickinson is making, business growth in the modern world happens online. Online sales platforms are emerging in importance; customers appreciate the convenience. It is likely that as online platforms evolve in sophistication, it could affect the very way we measure business growth.

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