JP Morgan’s Chief Market Strategist, Stephanie Flanders, returns to face Brewin Dolphin’s Ben Gutteridge (Head of Fund Research) and Guy Foster (head of Research) in our latest podcast. As the post-election smoke clears Stephanie looks at the big issues facing the UK economy generally and indeed the wider developed world.

The big issue that concerns Stephanie is the apparent sudden deterioration in the trend rate of productivity growth. Productivity is the amount of output or GDP divided by the number of people in work. The good news, for the UK, has been the resilience of employment but the flip side is that productivity has been lower as a result. A sudden rebound in growth with no change in employment could return the UK to its trend rate however, absent such a jump, the fear is that the productive capacity of the UK economy has been permanently diminished. But without this ‘spare capacity’, there would be no shock absorber for an increase in demand. This could mean inflationary pressures appear sooner and that interest rates have to rise faster than otherwise believed.