Uncertainty undermines confidence in economy

Apr 28 2010 by Andrew Hebden, The Journal

IF there is one thing that businesses dislike above all else it is uncertainty, so, while the findings from today's North East Business Barometer make for cheerier reading than the results of six or 12 months ago, they are hardly a cause for celebration.

Yes, it is good news that businesses are more optimistic than they were during 2009, but this is hardly a surprise given the severity of the recession we have just emerged from.

And it clearly remains a delicate recovery – even now, more than half of those firms questioned have seen either no increase or a decline in future orders.

This is a dangerous and difficult time for many business leaders. They sense that things are on the upturn, but the hard evidence of better times around the corner is still hard to come by.

All of this uncertainty is only heightened by the prospect of next week’s election. Our survey indicates that many businesses have been delaying investment decisions until after May 6 in the hope that the outcome of the poll will provide some clarity regarding the new tax regime and what form cuts in public sector spending may take.

The increasingly likely prospect of a hung parliament – which has emerged since the survey was carried out – complicates matters further.

Such a result is not necessarily a bad thing for business – the Liberal Democrats have some very intelligent things to say on the economy, even if their fondness for increased regulation is a concern.

But weeks of haggling between political parties to determine the look of the new Government will inevitably postpone the date of the post-election emergency budget that we all anticipate.

As a result, this period of uncertainty – which is clearly stalling the onset of the recovery – seems set to continue in the short-term at least.

Only when there is political certainty can we expect the economic certainty that will once again give businesses in the North East confidence to invest, and get the economy moving again.

Andrew Hebden - The Voice of nebusiness