Civitas warns of balance of payments crisis

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.