It's payback time

Oct 28 2009 by Andrew Sugden , The Journal

I'M encountering more businesses confidently looking to future but last week's GDP numbers gave scant succour to those of us keen to focus on the recovery.

A sixth consecutive quarter with the economy shrinking, albeit at a slower pace, makes this officially the longest recession since records began.

Many businesses have passed from hysteria to anxiety at the economic situation, and the tough times will be here for a while as we each try to do our little bit turn to the situation around.

It is modest comfort that the North East has fared better than we might have feared, and certainly proved itself more resilient than during previous downturns.

With national borrowing at £175bn payback time is just around the corner guaranteeing cuts in spending and tax rises. The only questions are when, and by how much.

The lexicon sees cuts that are 'savage' and budgets that are to be 'slashed', and all from politicians who until the middle of last year were outdoing each other with spending commitments.

This region is particularly exposed to this next phase of the downturn. With a larger public sector employment base and over half of the economy funded through the public purse, any cuts will be very keenly felt in our part of the world.

It is crucial that this doesn't become a public sector recession that stymies a wider recovery, a recovery that can only be built on business success. As the current government and its shadows examine their election commitments they should remember the maxim adopted by early environmentalists and 'first do no harm.'

There will be trade-offs, and it would be foolish for anyone to back ineffective programmes or vanity projects, but a budget that is motivated by political bravado rather than a thoughtful analysis of how to maintain a sustainable recovery in the North East could set us back decades.

Andrew Sugden is director of membership and policy at the North East Chamber of Commerce