CM December DECEMBER 2018

EXCLUSIVE REPORT
RISKY
BUSINESS
A global outlook of business performance in Q3.
AUTHOR – Nalanda Matia
THE global economic
upswing that caused an
uptick in global growth
around mid-2016 and early
2017 has largely sustained
itself, with Real GDP
growth rates for most country groups
continuing to expand before stabilising
in the next few years. While the overall
trend seems to be similar in general, the
outlook for emerging markets remains
more positive. On average, the emerging
nations are expected to maintain growth
rates of about 4.5 percent in 2019, while
the global average hovers around a tame
three percent, although managing to
remain above the post-recession average
of two percent. Divergence will occur
among the advanced economies as well,
as Dun & Bradstreet economists expect US
growth to decelerate post-2019 while the
UK is expected to maintain an accelerated
pace, given the nation is able to achieve
the desirable outcome of a negotiated
Brexit. From an economic perspective,
Brexit negotiations aiming at retaining
open trade with and access to the financial
markets of the European Union will prove
to be most beneficial.
However, some global risks continue
to linger. Markets have been rallying
recently on reports that China and the US
are making headway on trade, but tensions
still remain. Another cause for concern
and a possible threat to global growth
prospects is that China seems to be in the
initial phases of an economic slowdown
that primarily emanates from declining
effectiveness of several key factors like
quality of labour, efficient re-allocation of
capital that fuelled the country’s impressive
economic expansion in the past. On the
other hand, matters have eased slightly on
the prospect of a North American trade war
by the new agreement (USMCA) between
the US, Mexico and Canada. Although final
ratification and implementation of USMCA
remain pending, the agreement went a
long way to allay fears of a possible trade
war in the region impacting sustainable
growth within it and spreading globally.
However, none of the above factors nor the
currency crises in Argentina and Turkey
will have a significant bearing on the
outlook for global growth – at least in early
2019.
According to the Office for National
Statistics, overall UK GDP grew by 1.4
percent on a year over year basis in the second
quarter of 2018. A look into the vertical
specific view shows a wide range of growth
among the key industry segments. The
Services segments, led by the Professional,
Scientific and Technical Activities registered
the most growth (5.3 percent) since Q2 2017,
followed by Manufacturing and Real Estate
which grew 1.3 percent and 0.5 percent
respectively. Other segments like Health and
Social activities, Agriculture and Natural
Resources and the Financial and Insurance
sectors saw some contraction since Q2 2017.
Clearly, imbalances between important
sectors of the British economy as the nation
treads uncertainties surrounding Brexit.
Despite pockets of concern, the UK
labour market fundamentals remain fairly
healthy. Unemployment rate stands at its
post-recession low at four percent. Also,
labour productivity measures by the ONS’
Output per Worker index has continued
to climb since late 2015, with a few dips
along the way. There is some growth seen in
wages (Average weekly earnings), which has
increased by a little over two percent over
the past year – the growth rate being slightly
slower than that seen over the past quarters
and also from what could be expected in the
current job market.
Moving from the fundamentals of the
economy, to that of business health, we take
a detailed look at business liquidations by
industry. Significant variation exists between
sectors, with sectors like Personal Services
and Agriculture showing an increase in the
number of business liquidations over the
past year. Although all these sectors show
an increase in business liquidations during
the current quarter, differences in the trend
exist among them.
A third group of industry segments, led
by Transportation/Comms/Utilities and
Business Services, show a considerable
drop in business liquidations. Although all
these above-named sectors show a certain
outcome (increase/decrease/no change)
from the business liquidations perspective,
during the current quarter, differences in
the trend exist among them and may tell
a more detailed story. For example, for
the Agriculture, Government or the Retail
sector, the number of business liquidations
remain considerably lower than the post-
The Recognised Standard / www.cicm.com / December 2018 / PAGE 42