We all know that, like most of the rest of the world, the United Kingdom economy is in rough shape. It’s facing at least ten years of readjustments as it starts to turn toward increased exports rather than consumer spending, which has been the focus for some time. This is the conclusion of a recent report from the Ernst & Young Item Club – the group responsible for accurate economic forecasting in Britain.

This may be a very difficult transition for local firms that have dealt with domestic customers for many years. They will have to look to overseas markets to try to meet their current sales targets. Peter Spencer, a special adviser from Ernst & Young, said that Britain had been relying on the domestic consumer for almost ten years and that it would not work anymore. The team’s report went on to say that the UK would have trouble reaching even 1% growth in 2010. These are not very exciting numbers for many market analysts.

Spencer went on to say that he felt the UK consumer was simply cashed out and couldn’t go on spending like they had. The Ernst & Young report says that they expect to see a meager 0.4% increase in spending in the country this year. Spencer said that the only way Britain could turn things around is if the world economy started seeing a rapid growth, which is not likely at this point in time. It will take a lot of hard work and enterprise by the UK exporter to overcome these hurdles but Spencer said it could be done.

The Ernst & Young report from this week says refocusing trade to the overseas markets was going to be key to the success of many UK businesses. One place they suggest to start is China. The United Kingdom has been a large player in Asian markets in the past but they seem to have skipped over China to some extent. Currently, the UK has a very low market share in the country. In order to really get the economy back the British will have to look to this growing market in the coming year.

The report said that in 2011 they expect to see increases in UK exports but that 2010 could still be slow. Ernst and Young said that 2010 and 2011 would see export increases of 10% and 11%, respectively. This would calm the nerves of many investors and get the markets moving again. The UK government issued statistics showing the recession had ended in late 2009 but this was only made possible by temporary government measures.

The report said that firm restocking, the car scraping program, and a lower VAT had kept the country afloat during tough times.

It was expected that after the side effects of these measures went away trouble would begin again.

At the same time as this report, Begbies Traynor issued more data saying that insolvencies were down in the final quarter of 2009 – as much as 15% lower than a year before. Begbies Traynor felt this could be another side effect of government measures after the recession.

Both reports showed that 2010 might be a tough year for the economy but that things could bounce back in 2011.

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