New year, same old story for UK plc?

What lies ahead for 2006, asks Sara Yirrell

The government has always had a knack of taking a big brush and painting a glossy picture of the UK economy… but with some reports predicting a ‘gloomy’ start to the year, it is hardly a recipe for festive cheer.

According to market watcher BDO Stoy Hayward, this year we are set to experience the lowest annual GDP growth since 1992, and if the disappointing Christmas sales are anything to go by, 2006 could be off to a rocky start. BDO is predicting first quarter 2006 growth of around 2.3 per cent, growing to 2.7 per cent in Q2.

On top of that was the release of Chancellor Gordon Brown’s pre-budget report last week, which will probably take the average person until the full budget report next year to actually work out what the implications will be. However, there could be some potentially positive elements in the report for the channel.

The public sector, which can be a lucrative area for VARs, is one area that the government may well be clamping down on, as Brown is expected to miss his public sector borrowing target of £31.9bn.

This could be a mixed blessing as it might mean larger public sector bodies will finally get the message that ‘smaller is better’ when it comes to awarding contracts and getting value for money, rather than plumping for the usual monoliths that have very little flexibility.

In addition, the reports that fuel duty is to be frozen means good news for the distribution sector – the last thing these firms need is an extra financial burden in the form of more fuel tax and transport costs.

However, promises to cut red tape have, as expected, not come to fruition. As KPMG put it, the changes amount to a ‘tinkering around the edges rather than making the UK a significantly better place to do business’.

I’m not sure if anyone can fully predict how the next financial year will turn out; the old adage of adding value will continue to be churned out and those that have survived the past 12 months will be battening down the hatches, determined to survive whatever is thrown at them in 2006.