The event was held in the newly refurbished One Gloucester Place office block and was sponsored by owners Aviva Investors and Warner Estate plc.

Despite three sets of surveys suggesting that the UK economy had started the year better than expected Nick Parsons made it clear the downside risks far outweigh the upside.

Surveys of manufacturing, construction and services in February suggested increasing confidence amid rising markets and a brightening global outlook, especially in America. But one month's good figures belie the underying weakness in the UK economy supported by the prediction from the National Institute of Economic & Social Research [NIESR] that the UK economy will contract by 0.1% in 2012 and similar gloomy predictions from the IMF.

In his presentation to 150 attendees he said that the UK doesn’t have a debt problem but rather it is the rate at which the debt is increasing [the deficit] that is alarming. In 2009/10 £1bn was borrowed every 55 hours hence the coalition government’s unprecedented levels of fiscal tightening in an effort to reduce the burden.

As the Labour opposition has repeatedly pointed out, the deficit reduction plan inevitably depresses growth in the economy but NAB believes that without a robust plan to tackle the current scale of borrowing [11% of GDP] the interest rate paid for that borrowing would rise significantly perhaps to ten year rates of 5.5% instead of the current 2%.

But in terms of growth in the economy, the national deficit and national debt are a lesser problem than personal/household debt.  From 2000 to 2008, households extracted £315 billion in cash from the equity in their houses [mortgage equity withdrawal] to fund consumption. Over this period, the GDP of the UK increased by £457bn, hence almost 70% was accounted for by mortgage equity withdrawal. It was one of the greatest debt fuelled consumption booms in UK history as the population became slaves to their houses.

Over the past 3 ½ years, some £104 billion has been repaid as homeowners pay down borrowings but that cumulative burden is still in excess of £200bn and NAB estimates that it will take five to seven years to get household/personal debt under control. This partly explains why the savings rate of UK households is so low compared to other countries. The proportion of disposable income put into savings has fallen dramatically to just 7% compared to 10% in Germany and a staggering 47% in China. Of course the hoarding of disposable income brings problems of its own as the weak internal market for goods and services in China testifies.

In summary Nick Parsons said that the repayment of private sector debt, combined with the government's deficit reduction programme, is likely to result in a further "five to seven years of significant headwinds and challenges for the UK economy."

Click here to download Notes on Nick Parsons presentation