Looking back on 2012 we can clearly see that one of the most pressing problems facing the UK economy is the general lack of a coherent policy to boost growth. Politicians and their policy advisers appear bereft of any creative thinking surrounding this area, instead we are being offered an ever more desperate sounding series of initiatives designed to encourage lending to SME businesses.
With growth likely to be 1% or less in the coming year it is surely time to look for some really radical and game changing efforts from the coalition if they are to get the economy back on a sound footing and save themselves at the ballot box at the next election.
Such anaemic growth as forecast will need little to blow it off course and this offers us the spectre of a third recession since the financial crisis began.
At the same time on the political front we now see a dramatic rise in anti-European sentiment (look at the recent UKIP polling numbers), which can only cause further instability and concern both at home and abroad.
In this febrile environment of policy drift and political uncertainty businesses cannot be blamed for being defensive in their investment outlook and this negative feedback loop will simply reinforce the current situation.
So what can the Government do to support British business? Maybe it is time for some challenging thinking from our leaders. I have some suggestions or Vince Cable and his team.
- An accommodating tax regime with built in “time-to-pay” mechanisms allowing business to stagger VAT and PAYE just as in a distress situation. This could be based on company profitability allowing businesses that are moving out of profit to relieve their cash flow.
- Aggressive encouragement toward employment policy including strong financial incentives for apprenticeships
- Extensive Tax credits for exporters
- Government support for alternative forms of corporate finance including crowd-sourcing and pension-led funding
- Push ahead with much expanded plans for the British Business Bank
I agree that in the short term these are potentially revenue negative for the Government, however it is now becoming clear across the globe that austerity without investment in growth is a damaging policy and I would urge the current Government to act boldly.
British business has proven resilient over the years and given creative and progressive tools, I believe they will not disappoint.
Chairman, Clifton Asset Management Plc