“There are no quick fixes for the UK economy but a concerted effort to tackle the serious imbalances which created our legacy of debt and faltering growth will secure a better, brighter future for all of us’’, says the CBI Director-General, John Cridland in his New Year message.
‘’2012 is going to be a hard road but if we are canny and act now to put in place solid economic foundations, we will be stronger and secure a better future for ourselves and our families. The faltering recovery with family and business budgets under pressure and the ongoing crisis in the Eurozone are stark reminders of the need to rebalance our economy away from household and government debt. We need to identify how the UK will earn its living and pay its way in the years ahead and that means adjusting to change. The hard graft of rebalancing is the only way it can be achieved, so it’s time to stop talking about it and get on with it.
“If we fail, the UK’s debts will continue to grow and our trend growth-rate will remain low. Only through rebalancing can we return growth to long-term sustainable levels. The UK economy has become dominated by debt driven household and government consumption, which together accounted for 89% of GDP in 2009 – more than in France, Germany or the US. To achieve sustainable growth in the medium to long-term, the economy has to become more driven by investment and exports, while allowing the burdens of both government and consumer debt to subside.
“The task of delivering rebalanced growth will be achieved most effectively by ‘swimming with the tide’ to take advantage of the long-term domestic and global changes, particularly the rise of middle-class consumers in emerging markets, spurring a greater demand for our services. To make up for the loss of public sector spending, the private sector needs to deliver £170 billion of new investment over the next five years, so it’s time to power-up and get on with rebalancing’’.
The CBI does not share the view of trade unions, opposition Labour MPs and some think-tanks, who argue that the government’s deficit reduction plans should be tempered to allow growth to pick up. The CBI wants rebalancing as well as debt reduction, something it has termed a “Plan A Plus” rather than a plan B. Its most likely scenario for rebalancing sees net trade and investment exceeding household consumption to produce growth. It admits there are risks to Britain’s net trade, given that 50% of its exports go to Europe. The group urges businesses to look beyond Europe and take advantage of trends such as the rise of middle-class consumers in emerging markets.