Partner Article

'Cocktail' of economic risks avoidable if rational - Deloitte

George Osborne has announced that the UK faces a ‘cocktail’ of economic risks, with the impact of the Chinese share slump expected to have an impact on the UK’s largest listed companies.

However, according to Deloitte’s Chris Robertson, partner and head of plc activity in the North West, the impact to the region’s businesses should be minimal if they act in a rational manner.

Robertson said:

“While the Chancellor’s ‘cocktail of economic risks’ comments and the slow-down in China appear alarming on the surface, businesses should approach this rationally. The principal drivers of turbulence in world markets currently emanate from relative weaknesses in the Chinese economy, consumer demand there in particular, and geopolitical worries across the Middle East and Eastern Europe. From a pure economic standpoint, there are not many North West companies who will be adversely impacted by these factors directly.

“Having said that, companies and markets are driven by human beings, and we don’t always act purely from a rational perspective. Sentiment can drive dysfunctional behaviour, with uncertainty typically breeding more defensive strategies – delaying investment, preserving cash etc. If too many individuals (consumers or business leaders) react in this way, this will flow through negatively to the real economy.

“From a North West perspective, a prolonged period of market instability is not positive for anyone, particularly those looking to raise capital through either the equity or debt markets. However, assuming businesses remain calm, there is no reason why growth plans that existed pre-Christmas cannot be progressed this year.”

This was posted in Bdaily's Members' News section by Pablo Rodriguez .