Source for article: http:// internationalechem. com / the-ph-report /
“ BUSINESS AS USUAL?”
OPTIONS FADE IN
POST-BREXIT WORLD
Historians will likely look back on the Brexit vote in 2016 as marking the end of an era in the global economy. Of course, there are still some who share the UK’ s Foreign Secretary’ s belief that it is possible“ to have one’ s cake and eat it”, but in general, the wider implications of the vote are already starting to filter through into politics, the economy and societal values within the UK, Europe and around the world.
By Paul Hodges & Daniël de Blocq van Scheltinga
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A key reason for this suggestion of a move into a post-Brexit world is that the vote did not take place in a vacuum. Underlying it was the transformational economic, social and political impact of demographic change as discussed here in June(‘ Ageing populations create paradigm shift for growth’):
• Increasing life expectancy inevitably makes it difficult to maintain Baby Boomer-led levels of economic growth. The West now has an entirely new generation of people in the New Old 55 + generation, who already own most of what they need, whilst their incomes decline as they move into retirement.
• The combination with the collapse of fertility rates below replacement levels makes it impossible to maintain these growth levels, as the core Wealth Creator 25 – 54 generation has been reducing on a relative basis for 45 years.
You can contact Paul Hodges on phodges @ iec. eu. com
This month we therefore focus on the implications of this change in 4 critical areas for businesses and investors. We argue that the successful“ business as usual” strategies of the past have reached their sell-by date. Instead, Scenario planning is essential in today’ s VUCA world of Volatility, Uncertainty, Complexity and Ambiguity.
We look first at the global economy. We demonstrate that the American Chemical Council’ s index of global capacity utilisation is not only very closely correlated with the IMF’ s own data for global economic growth, but is also a far better forecasting tool. We then focus on developments in China – recently the powerhouse for growth – where three quite different Scenarios exist for the reform programme, as the Princelings and Populists battle to control the Politburo and its Standing Committee.
Next we turn to the US, where the auto industry has been a key driver for retail sales and GDP. We suggest that it now faces a typical