UK at risk from a 'dangerous cocktail': Osborne

The U.K.'s Chancellor George Osborne is to warn of a "dangerous cocktail" of global risks that could affect the U.K.'s currently strengthening economy.

Osborne will points to the slowdown in China, slide in commodity prices and political problems in emerging markets as potentially having a knock-on effect on the U.K.'s growth in 2016, according to a preview of a speech Osborne is due to give to business leaders in Cardiff, Wales on Thursday.

UK Chancellor of the Exchequer George Osborne speaks at a Conservative Party Conference.
Paul Ellis I AFP | Getty Images
UK Chancellor of the Exchequer George Osborne speaks at a Conservative Party Conference.

"Anyone who thinks it's 'mission accomplished' with the British economy is making a grave mistake. 2016 is the year we can get down to work and make the lasting changes Britain so badly needs,' Osborne will say.

The slowdown in China, problems in Brazil and Russia, the slide in commodity prices, the risk of stagnation and political developments in the Middle East are all expected to be cited as potential hazards, according to the preview of the speech issued by the U.K Treasury.

Ahead of the speech, sterling hit a four-year low against the U.S. dollar at $1.45.

Osborne is expected to note that the International Monetary fund believes world growth in 2015 was the slowest since 2009, and if problems in emerging markets persist, or market volatility continues, global growth in 2016 could be much the same.

The U.K.'s economy is expected to have grown 2.5 percent in 2015 and is predicted to grow 2.2 percent in 2016, according to forecasts by the International Monetary Fund, but Osborne is expected to warn against complacency, adding that his controversial program of government spending cuts and austerity must be maintained.

"Last year was the worst for global growth since the crash and this year opens with a dangerous cocktail of new threats. For Britain, the only antidote to that is confronting complacency and sticking to the course we've charted."

"Today I want to issue this warning: unless we finish the job of fixing the public finances, to get Britain back into the black by finally spending less than we borrow, all of the progress we have made together could still easily be reversed."

Latest figures appear to back up Osborne's concerns. Growth in the U.K. might be robust and unemployment is at a near-10 year low, but there are signs of weakness. This is particularly evident in the manufacturing sector, placing further pressure on the economy which is increasingly reliant on the services sector and consumer spending.

According to the British Chambers of Commerce data released on Thursday, manufacturing exports slumped in the fourth quarter.

Britain's largest private-sector business survey, based on almost 7,500 responses from firms showed that most key manufacturing and services balances were weaker in the fourth quarter, "but manufacturing firms fared far worse," the BCC noted, adding that "this has led Britain's two-tier growth trend to become further entrenched."

"The manufacturing sector continues to struggle. Domestic and export sales and order balances have now fallen well below their pre-recession levels in 2007, suggesting that the sector is close to stagnation," the BCC warned.

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