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We all know that, like most of the rest of the world, the United Kingdom economy is in rough shape. It’s facing at least ten years of readjustments as it starts to turn toward increased exports rather than consumer spending, which has been the focus for some time. This is the conclusion of a recent report from the Ernst & Young Item Club – the group responsible for accurate economic forecasting in Britain.

Many local companies will find this to be a very tough transition because they have dealt with UK clients for so long. Looking to the overseas markets will be the only way that they will be able to meet current sales targets in many cases. The Ernst & Young report says that the UK economy has focused much of its energy on the domestic consumer for 10-12 years but that it wouldn’t work going forward. It was said that even a 1% growth rate would be difficult to see in 2010 which is pretty tough for many market analysts to deal with. Chief economic adviser, Peter Spencer said that UK consumers were now essentially cashed out.

Spencer went on to say that domestic spending couldn’t continue at the rate at it had in recent years. The Ernst & Young Item Club report also said spending in the country would increase by less than 0.5% in 2010. These are very low numbers compared to most of the last 20 years. They suggested that it could be very difficult but that firms could grow their global exports in 2010 with a lot of “energy and enterprise”

The team went on to say that this refocus towards overseas trading from the domestic consumer wasn’t going to be an easy transition and that there might be many business causalities. One of the countries that Spencer suggested would be good to focus on is China. The UK has a very low market share in China and it’s expected to be a market that they start focusing resources towards, as the potential is so large. In recent years, Britain has done a lot of business in Asia but has not focused their sights on China as effectively as they could have but Spencer hopes that will change.

In 2011, the Ernst and Young report expects to see an increase in exports for the UK but 2010 will be quite slow. The good thing is that 2011 may see as much as 9% growth and then up to 10% in 2012. This will calm many investors who have felt concerned about the recession and it should help the UK economy to turn around. Figures from last year show that the UK officially ended its recession in October 2009 but this was only made possible by unsustainable measures by the government.

The report said that firm restocking, the car scraping program, and a lower VAT had kept the country afloat during tough times.

It was expected that after the side effects of these measures went away trouble would begin again.

Another report by Begbies Traynor says that insolvencies in the final quarter of 2009 were actually 15% lower than the same time a year before. This statistic was likely another result of government support measures to try to keep the economy from plummeting further.

One thing Ernst & Young suggested was that the government could lower interest rates even though further unemployment was expected.

Learn more about consumer spending and IVAs by visiting Mike Garrett’s website.