Our Three 2013 Predictions That Actually Happened

Published: January 10, 2014

“We’ve picked out three predictions we made in 2013 that turned out to be quite prescient after all.”

Just like everyone else, in the first full week after the holidays we’ve been reading a lot of predictions for the year ahead. It got us thinking about how many of the potential big issues for 2014 we’d covered in our blogs last year. We’ve picked out three that turned out to be quite prescient after all.

In September, we wrote about Mark Carney’s rune reading on Threadneedle Street as the Bank of England began to provide forward guidance tying interest rate rises to a drop in the unemployment rate. We wrote that central banks rely on their credibility; without acceptance of what they say, policies they introduce to encourage business investment won’t work. When a central bank sets out future policy, it has to deliver on it. In the US, the Federal Reserve’s credibility was undermined by not one, but two, volte faces as the Fed first said it would, then it wouldn’t, then actually yeah it would, taper its programme of quantitative easing. New Fed Chair Janet Yellen will have to work to restore trust in 2014. In the UK, Carney’s credibility and his forward guidance are under constant scrutiny from those who disagree with his reading of the economy. He’s faced questions about a new housing bubble, the risk of inflation and the economy’s long-term stability. As the economy improves, forward guidance will face further pressure.

In June we wrote about the (in)elasticity of corporate reputations. The exposure of tax avoidance by major businesses operating in the UK dominated summer’s headlines. But, as we discovered, some reputations ‘stretched’, and some didn’t. We suggested that for some, like Google and Amazon, the competition wasn’t strong enough for the scandal to draw people away; the product is too good, and using the companies is too convenient. This seems to have held up; Amazon had record sales this holiday season and Google’s profits this year comfortably beat analysts’ forecasts. For others, the impact is larger as consumers turn away in search of an untainted option. In 2014 we’ll continue to see if exposure changes behaviour, at least for those companies where scandal doesn’t pay.

An issue from the end of 2013 that we think is going to keep running in 2014 is the future of higher education in the UK. In December, we wrote about the removal of the cap on student numbers from 2015. This year could see further reforms to higher education as the Government prepares to take on the cost of additional university places and seeks to sell off the existing loan book. The litmus test will come during clearing 2015 when top UK higher education institutions will be able to draw students with unexpectedly good results from less-sought-after universities. We expect to see a repeat of 2013’s frantic marketing during clearing.

Keep an eye on the Linstock News & Views section for more insight on the big issues in 2014.

Arlen Pettitt

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