R129736_514373 A new Civitas report, written by Professor Rowthorn and Ken Coutts, warns that the UK faces a worsening balance of payments deficit in the years ahead. It identifies three big worrying factors:

  • UK domestic spending will increase by 1.5% p.a. in 2010, 2.5% p.a. in 2011 and 3% thereafter – sucking in consumer goods;
  • The real price of imported food will increase at 2% p.a. from 2010;
  • UK energy imports will rise as the volume of UK North Sea oil production falls by 7% p.a. from 2010.

The report recommends three main courses of action:

  • Future reform of the financial sector should be designed to contribute to the export potential of this sector.
  • In the case of manufacturing and knowledge-intensive services, there is scope for an 'industrial policy'.
  • A further devaluation of sterling.

Without action, warn the authors, the UK deficit is likely to more than double from the 2009 rate of 2% of GDP to almost 5% in 2020.

Click here for a PDF of the full report.

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