The UK economy is growing strongly, at around 0.7% per quarter, and now sits at 3.6% above its pre-recession peak, according to Alpesh Paleja, head of economic analysis at the CBI.
Businesses and consumers are confident, against an improved global outlook, while a modest improvement in credit due in part to the Government’s lending scheme has resulted in a significant contribution from household spending and business investment.
“This is good for the sustainability of the recovery,” Paleja told delegates at the British Vehicle Rental and Leasing Association’s annual conference. Full-year growth in 2014 would be around 3%, he added, while 2015/16 would slow to a “decent 2.5%”.
“Wages will recover which will also support the economic strength, but there is political uncertainty ahead with the General Election and a slowing in the global economy so there are some risks,” he added.
Paleja’s biggest concern is over net trade, with deteriorating export orders bringing less money into the UK.
Good news for manufacturers and the leasing industry is that, while the CBI expects interest rates to start rising in mid-2015, “monetary policy will stay loose for a while”.
“The majority of the Monetary Policy Committee wants to see more recovery first,” Paleja said. “There is uncertainty over the level of spare capacity while inflationary pressure remains muted.”
He added: “The timing of the interest rates rise is a moot point. What’s important is the path of monetary policy. There is ample scope to support the economy going forward.”
By this he meant that any rises would be moderate and infrequent.
Meanwhile, the Government was only halfway to hitting its deficit reduction targets which would result in further “severe cuts” for public sector departments over the next few years.
Paleja also referred to the Government’s five-year roads network investment plan, pointing out that “it is not binding across all the parties – but it needs to be for delivery”.
The first half of 2014 saw a rise in the number of deaths on UK roads, although the Government was “not sure why yet – we will have to analyse the data at the end of the year”, said John Parkinson of the Department for Transport.
Parkinson told delegates: “We are looking at the impact of the increase in fixed penalties for the use of mobile phones, but we don’t expect to see anything different in this parliament. We are also researching other distractions in cars; it’s an area that a future Government will want to look at to reduce the risk of distraction.”
The Government is also clamping down on drink-driving and the growing issue of drug-driving, he added.
“We are getting rid of the statutory power for drivers to play for time by asking for a doctor to be present for blood tests,” said Parkinson. “We also have mobile drug screening available next year for cannabis and cocaine. And this is just the start – the strategy will be refined over time.”
He said there was “excitement over driverless cars” which were a “real opportunity to eliminate human error” which caused the majority of vehicle crashes.
“The Chancellor has doubled the funding to £20 million for trials to begin next year – it will keep the UK at the forefront of the work on autonomous cars,” he said.
“There are issues to be addressed: the technology is ahead of legislation and moral/ethical issues.The department is reviewing legislation now.”
Three threats from autonomous vehicles
KPMG’s Wil Rockall predicted that driverless cars would be “commonplace” on UK roads within five to 10 years, but he had three concerns that he believes need addressing:
Spam Jam: influencing or subverting the flow of traffic, for example, causing jams in city centres on purpose to create gridlock, a threat potentially posed by terrorists or protestors.
Coded morality: who is liable for car coding from a morality point of view, for example, the decision taken by a car when swerving to avoid a pedestrian walking into the road if that means driving into a queue of people at a bus stop.
Privacy: who can access information, who holds the data on journey destinations, who is travelling, etc.
“We have to work out now as an industry how to address these threats before the cars are launched,” said Rockall.