Papering over the cracks?

Jan 27 2010 By Andrew Hebden, The Journal

SO what should we make of the modest – to say the least – 0.1% growth recorded by the UK economy during the last quarter of 2009? What is for certain is that no-one will be celebrating this tentative step out of the "great recession", as the Tories have helpfully renamed it.

The first point to make is that the figure, over which there will be much debate among economists and politicians, is likely to be revised – probably upwards – by the Office of National Statistics in the coming months. So we shouldn’t get too hung up on the specifics.

Nonetheless, the meagre scale of the bounce back underlines the fact that the recovery is barely underway – if at all. There has been much talk nationally of the long and slow road back to good times, but the sentiment locally – across all sectors – has always been more cautious. The ONS statistics suggest that the economy is still doing little more than bumping along the bottom of the cycle – and few of those at the sharp end of business in the North East would surely disagree.

If this news brings home the fragile reality of the recovery then it will be no bad thing at all. Especially, it might be argued, for those in the Conservative Party who seem intent on delivering draconian public spending cuts as soon as David Cameron makes his expected arrival into Number Ten. That prospect is only heightening fears of the double dip recession that we are all desperate to avoid.

The real danger of yesterday’s growth figures was that – had they outperformed expectations – they may have simply served to paper over the cracks, when the fundamental causes of the crisis have still not been addressed.

The financial services sector remains unchecked and much reliance is placed on a revival of consumer spending. While this has a role to play, it is not sufficient in itself.

While politicians talk of the need to reconstruct our economy around industries that add real value and to revive flagging exports, there is little evidence of such policies.

The one exception was the scrappage scheme – which for all its success, was only a temporary measure which will have no lasting benefit to the beleaguered motor manufacturers.

Fortunately, local firms were last week given a tangible helping hand with the launch of the £125m Finance for North East Business scheme – a scheme devised and delivered in the region. It is a product of the kind of radical thinking which is desperately lacking from most of our national politicians.