Bold action needed now

Jun 22 2010 by Sarah Green, The Journal

TODAY'S emergency Budget will inevitably announce further cuts and therefore it is clear the way out of recession cannot be lead by Government spending.

Evidence last week from the supermarkets shows that consumer spending is weak and we are unlikely to see a consumer-led recovery. Therefore it is critical that confidence returns in the private sector and businesses begin to invest to drive economic recovery.

It is essential that today’s emergency Budget creates the right conditions for businesses to invest for growth and create jobs, as well as setting out bold action to repair the public finances.

The UK’s future economic prospects depend on the ability of firms across the country to create new jobs and win orders.

The CBI sees the recovery in the UK economy staying on track, but warned it will be protracted as urgent action is taken to reduce the budget deficit.

However, after a strong pick-up in manufacturing activity, as seen here in the North East, there is a forecast of slightly faster growth this year.

A CBI prediction of a 1.3% growth in the economy this year reflects the relative strength of the economy over recent months, with industrial production showing solid growth and overseas demand for UK-made goods strengthening, buoyed by the relative weakness of sterling. This is good news for the North East’s export -driven manufacturing sector. The recovery is forecast to build momentum next year when UK exports are expected to grow by 6.9% in 2011, and continue to be boosted by the weak pound and strengthening world trade.

Despite these signs of small quarterly growth, the outlook remains uncertain and business confidence is fragile, particularly at a regional level where there are real concerns about the immediate impact of cuts in Government spend.

Our view is that the UK’s tentative recovery will be sustained. However, economic growth will be slow and we cannot expect a return to pre- recession GDP levels until 2012.

Despite firms taking a more cautious approach to spending decisions in the face of continuing economic uncertainty, businesses can become the growth engine for the future but we must maintain our work with the Government to ensure the conditions for success.

Sarah Green is regional director of CBI North East