What is the economic outlook for 2010?
There are still some strong headwinds, such as rising unemployment (or people working shorter weeks) and highly geared balance sheets, personal and corporate. The UK economy does not mirror the UK stock market, which has recovered significantly as interest rates have fallen making saving less appealing than investing in shares and UK plc profits are bolstered by incomes from overseas subsidiaries, flattered by the devalued pound.
 
When will bank lending to small businesses ease?
Difficult to say. The banks still have balance sheet problems and are holding positions in companies where the value now breaks in the debt, and hence the equity is worthless. The banks are still reluctant to unwind these positions as it would involve taking writedowns. In most cases, they are even reluctant to take control of the business because they cannot deal with the liabilities.
 
Inflation or deflation in 2010?
Inflation, but low at first, with a risk of QE-induced inflation in the second half with concomitant interest rate hikes. Inflation will be affected by the VAT hike in January and Britain may suffer from rising input prices due to the rest of the developed world beating us out of the recession (not to mention problems of weak currency for imported materials and finished goods – don't forget our BOP [balance of payment] deficit). Although inflation in the UK may be tempered by fiscal policy (ie rising taxes supressing spending), this is cost push inflation as opposed to demand pull. This may necessitate interest rate rises to try to control the inflation which will make life difficult for businesses and home owners – potentially depressing house prices further.

My concern is the risk for the UK of stagflation.
 
U, V, W, L?
Probably W but not in this type face. I think there is further bad news to come and the situation in Dubai may get worse and not be supported by the neighbours.
 
What do you see as the key business challenges for 2010?
For printing – the UK languishing in recession means consumer spending will stay modest and hence ad spend and circulations may still suffer. Input costs stay high where goods are imported (eg pulp and paper). Difficult to fund any growth or new business opportunites and little incentive to risk equity given the high tax rates.