1. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) dark backgrounds for onscreen; (2) light backgrounds for handouts. 1 ! 2 EY ITEM Club Spring 2016 forecast: How long can t he consumer drive the recovery? Peter Arnold April 2016

2. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) dark backgrounds for onscreen; (2) light backgrounds for handouts. 1 ! 2 The last gasps of a consumer led recover, while we (still) wait for rebalancing to investment and export-led growth ► The forecast shows growth of 2.3% in GDP this year, driven largely by the consumer, the main beneficiary of the collapse in commodity prices ► However, the headwinds facing the consumer resume next year as inflation returns and taxes and other levies begin to bite ► Business investment stalled in the second half of last year and industrial surveys have weakened further this year ► Exports also stalled in the second half of 2015, while import growth picked up - the current account deficit of 7% of GDP the largest on record ► Investment should recover post-referendum

3. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) dark backgrounds for onscreen; (2) light backgrounds for handouts. 1 ! 2 Saving is at an all-time low, but the debt to income ratio is still remarkably stable…

4. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) dark backgrounds for onscreen; (2) light backgrounds for handouts. 1 ! 2 Instead of releasing equity, people are financing housing investment by selling financial assets…

5. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) dark backgrounds for onscreen; (2) light backgrounds for handouts. 1 ! 2 Households have also relied on labour rather than credit markets to support spending… ► During the recession, as workers took cuts in real wages to preserve their jobs ► As the economy recovered between the end of 2009 and 2015, employment increased from 70.6% of the population of working age to 74.1% ► Average hours, which usually trend down over time, increased from 31.5 to 32.2 a week ► In contrast, the employment rate remained flat at around 72.8% between the end of 2001 and end 2007, while average hours fell from 32.5 to 31.9 a week But these trends are now likely to slow....

6. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) dark backgrounds for onscreen; (2) light backgrounds for handouts. 1 ! 2 Consumption slows and the fall in unemployment comes to an end…

7. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) dark backgrounds for onscreen; (2) light backgrounds for handouts. 1 ! 2 External trade continues to disappoint …

8. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) dark backgrounds for onscreen; (2) light backgrounds for handouts. 1 ! 2 Business confidence has weakened but investment should bounce back following a vote to remain in the EU…

9. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) dark backgrounds for onscreen; (2) light backgrounds for handouts. 1 ! 2 The referendum on EU membership… ► However, it will be a different story if there is a vote to leave on June 23 ► Short term, the fundamentals would remain in place during the 2 year transition period but uncertainty about the eventual settlement could hit business confidence and investment ► Scenarios for exit have been modelled by OE covering: - Trade with REU and RoW - Migration - Regulation - Fiscal and monetary policy

10. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) dark backgrounds for onscreen; (2) light backgrounds for handouts. 1 ! 2 The government response would be critical… A populist response ► Aggressive clampdown on migration ► No regulatory relaxation ► Maintain external tariff with RoW ► Spend any fiscal savings ► A Liberal response ► Modest migration controls, with targeting ► Maximize regulatory opportunity ► Abolish external tariffs ► Cut tax with any fiscal savings

11. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) dark backgrounds for onscreen; (2) light backgrounds for handouts. 1 ! 2 According to the OE report it is hard to see any net positive economic benefit under any Brexit scenario: Key: Policy direction: LIB – liberal MOD – moderate POP – populist Trade agreement: CUS – customs union BIL – bilateral accords FTA – free trade agreement MFN – most favoured nation

12. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) dark backgrounds for onscreen; (2) light backgrounds for handouts. 1 ! 2 The EY ITEM Club forecast for the UK Economy, Spring 2016 % changes on previous year except borrowing, current account and interest & exchange rates