Overview

A sound balance of payments is required for national solvency. Countries cannot continuously run large current account deficits because of the resulting growth of foreign debt; sooner or later some form of adjustment will be required. In Prospects for the UK Balance of Payments , University of Cambridge economists Ken Coutts and Robert Rowthorn present a previously unseen projection of what will happen to the UK current account balance over the next decade. The picture revealed is bleak; they fear that the UK's current account deficit could steadily deteriorate from under 2 per cent of GDP to almost 5 per cent by 2020. Coutts and Rowthorn argue that the UK economy has become dangerously unbalanced as we have put too much faith in finance at the expense of manufacturing and other activities and, they assert, if unchecked, it will lead to a painful economic adjustment involving lost output and higher unemployment. A relentless deterioration in the balance of payments is unsustainable and, Coutts and Rowthorn assert, the costs of being over-concerned about the UK's balance of payments may well be less than the costs of being under-concerned. They recommend tackling the deficit with policies designed to boost UK trade performance: in particular assigning a central role to manufacturing.

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9781906837129

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Ken Coutts is Assistant Director of Research in the Faculty of Economics, University of Cambridge and Fellow in Economics, Selwyn College, Cambridge. His main research interests cover macroeconomic policy including fiscal and monetary policy, international trade and capital flows and balance of payments issues. He has published a number of articles on developments in Britain's balance of payments. He also does research on the behaviour of manufacturing prices and has published articles on the role of domestic and international competition on price setting by manufacturing firms. Robert Rowthorn is Emeritus Professor of Economics and Fellow of King's College, Cambridge. He is the author a number of academic articles on economic growth, structural change and the balance of payments. His books include, De-industrialisation and Foreign Trade (with John Wells). He has been a consultant on these topics for a variety of bodies including the International Monetary Fund, the UN Commission on Trade and Development, the International Labour Organisation and the British government. Bill Martin is senior research associate at the Centre for Business Research, University of Cambridge. He was a special adviser in the Central Policy Review Staff between 1981 and 1983 and a Special Adviser to the House of Commons Treasury Select Committee between 1986 and 1997. Until 2004, he was Chief Economist at the fund management arm of UBS. He continues to research in the field of macroeconomics and is a member of the Financial Services Consumer Panel.

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