David Kern, chief economist at the British Chambers of Commerce, argues that green shoots do not necessarily lead to sustained recovery
The present position can be summed up as follows: the recession was much worse than people anticipated and recovery will occur at a slow pace. The view at the moment is that the economy will start recovering in the second half of this year, but the question is: can this be sustained?
While there has been a slight bounce-back, things like consumer spending and investment are still falling. At the moment the outlook remains uncertain and some of the figures released have been mixed. On the one hand we’ve had reports that housing is starting to stabilise, but on the other we’ve seen really poor business investment figures, which is something we should be worried about.
Unless trends reverse, lack of investment will mean that when recovery does come, businesses will not have the capital to proceed. We’re at a critical point – things could get better or they could actually
Short-term stimulus, such as quantitative easing, needs to be continued. But it’s also important that we plan public financing properly. The government needs to draw up a credible plan to reduce debt. Because of the massive deficit we have, the Treasury should be careful not to turn to the business sector and increase taxes in order to pay it off.
Business is where the recovery will come from – nowhere else is wealth-creating.