2008 will be a "difficult year" for the British economy, but it is important not to exaggerate the risks and talk ourselves into a more serious downturn, the CBI's director-general said today.
In a New Year message Richard Lambert said the most likely outcome was a "soft landing" as the economy slows - despite the uncertain times ahead and with the UK exposed to twin shocks from rising commodity prices and the continuing credit crunch.
And he listed five reasons for feeling more cheerful about the future - including the equity that many households have got locked away in their homes.
Around 60 per cent of mortgage borrowers have more than £100,000 of equity in their homes, compared to less than 10 per cent in 1993. That gives them "a comfortable cushion to fall back on if times get tough", he argued. Another plus point is that the Bank of England has been "doing a good job of managing inflation expectations".
In his message, the head of the country's biggest business group says "we may be entering a new phase" in the structure of the global economy, with a "bumpier ride in the years to come" a real possibility. He reflects that "the global economic balance of power is shifting East" to China and India, who have driven growth as the US economy has slowed, and that alongside this "we appear to have moved into an era of high energy prices, and one where investment decisions will be dictated in part by the price of carbon".
The UK must focus on the "absolute necessity of raising the national skills and knowledge base at every level", on strengthening its flexible labour market and on developing its transport and power infrastructure.