A few days after the ACT Annual Conference ended, the latest UK GDP figures were released. A fall of 0.2% in the first three months of 2012 prompted much gloom. But those treasurers who attended the opening session of the conference may have recalled the views of the commentator and financial journalist Anthony Hilton, who suggested that world dominated by the instant judgments of the media and the financial markets sometimes focused on issues that don’t particularly matter much.
One example he gave was the obsession about the GDP figures. Clearly in the long term the need for economic growth is important, but would it have really made much difference if that minus 0.2% had been a positive 0.2%? Hilton suggested it would not, especially as the first snapshot of UK GDP is inevitably revised upwards on average by as much as 0.9%, which transforms the picture. Other areas of the economy which Hilton suggests we collectively fret over too much are debt in the UK and currency unions. Even if the government plans to reduce debt do not succeed it will still be low as a percentage of DP in historical terms. And while international money agreements have ended, the world has carried on; he pointed to the Bretton Woods system of monetary management which finished in the early 1970s.
Hilton suggested the ending of the euro in its current form could turn out to be seen as a relief rather than a trauma.
As you may have expected, the ACT Annual Conference was not a 100% worry-free zone. There are still plenty of challenges out there, not only for countries but for companies as well. The figures and the statistics that stacked up across the three days pointed to one inevitable conclusion for those who live in Europe: in terms of economic growth the party isn’t happening in this part of the world. At some point early in this century China is going to pass the US as the world’s biggest economy while India continues to increase in economic significance.
The question for individuals, corporates and governments in Europe is how to respond to the challenge of remaining remotely competitive and staying relevant when the game continues to change at a faster rate than any of us have seen in our lifetimes. The view from the conference was that companies can continue to be profitable and compete, but they must have the right mindset and strategy, which needs to be constantly tested and revised.
While the immediate economic outlook is cloudy and the headlines are often filled with little of consequence, that should not distract us from the overall picture: power is shifting to Asia and we in Europe must embrace that idea and learn to live with the new reality.
PETER WILLIAMS
EDITOR