THE British Chambers of Commerce’s (BCC) new forecast, published today, makes for pretty grim reading. We’re now expecting the UK economy to contract in 2012, and for growth to be anaemic in 2013. Although there are many businesses out there who are proving surprisingly resilient, the economy as a whole continues to bump along the bottom.
If we are to avoid a Japan-style lost decade, we need to take swift action to fight stagnation – and focus relentlessly on the creation of a new model economy for the UK. That means a three-pronged approach, with immediate measures to support business confidence and investment, and a more radical long-term growth plan, sitting alongside a continued commitment to deficit reduction to maintain the UK’s market credibility.
If we want UK businesses to achieve their full global potential, the UK government must play its part, both by ensuring a favourable business environment and by addressing some of the market failures that currently hold back business growth.
The government has some tough decisions to make – as it will have to determine how to pay for immediate measures to kick-start the economy in the short term. The BCC would like to see a special capital allowance scheme to incentivise business investment, funding to kick-start stalled housing projects, and more help for companies looking to expand and take on staff.
This doesn’t mean abandoning deficit reduction, or indulging in politics of the playground such as Plan A vs Plan B. What it means is being flexible in the face of a stagnating economy here at home, and a worsening crisis in the Eurozone.
It is up to ministers whether they want to pay for these measures through additional cuts, through borrowing, or through a mixture of the two. None of these options is easy. But the government must face up to reality, and take action swiftly. Otherwise, its pursuit of deficit reduction will itself be undermined by stagnant growth.
Looking to the long term, there is a big question mark over how Britain will prosper in the years to come. The BCC has called for a British business bank to lend to new and growing companies, and for significant and on-going investment in the infrastructure businesses need to trade with the world. Our long-term competitiveness depends on making big and bold decision on business finance and infrastructure today, rather than just muddling through.
Businesses large and small, north and south, want a new contract with government. In return for taking on greater risk, whether through investment here at home, or through breaking into new markets overseas, they want a surer hand on the tiller.
Politicians need to be bold and show leadership, bringing the business community and the public along on the journey. If the government can put Britain above politics, they will be rewarded tomorrow for the tough choices they have to take today.
John Longworth is director general of the British Chambers of Commerce.