Our regular readers will know that we continue to liberally apply a pinch of salt to reports on the solidity of the much-heralded economic recovery for several reasons.
Firstly, most national news emanates from London and there is still a great gulf between the capital and the rest of the country. Much of London’s optimism is down to the enormous rise in the value of property which has contributed to London home owners feeling wealthier.
Secondly, a little-noticed report in late April in the Daily Telegraph noted the latest data from the Bank of England’s quarterly report showing that business lending, especially to smaller and medium-sized businesses, has continued to decline for the sixth successive quarter.
Thirdly, there is the evidence of our own eyes and ears. We are hearing that small and micro businesses are still facing tough trading conditions. Most are having to work hard for the money they make as well as dealing with continued uncertainty and experiencing the frustration of a long wait for the decision on every contract they pitch for.
Finally, the greatest impediment to recovery and growth remains a fear of interest rates. While they will inevitably rise, the concerns are threefold: 1. the ability to service them, 2. the impact on consumer spending and 3. whether banks and other secured lenders will call in their loans like they have in the recovery phase after previous recessions.
Interestingly, David Boyle, writing in the Business Guardian this week points out that talk of rebalancing the economy (from London to the regions and from financial to manufacturing sectors) seems to have morphed into little more than reducing the trade deficit.
He argues that far more attention needs to be paid to putting money into what he calls “ultra-micro-projects” perhaps by using existing resources such as waste land, unoccupied people and buildings for innovative small businesses that would bring money into the community.
It may not be glamorous, nor is it attractive to the policy makers, but given that the so-called recovery is taking place in a situation where there is still a large amount of business and consumer debt perhaps his idea has some merit?