UK economy: Action needed to boost confidence, says IoD
- 22 August 2012
- From the section Business
Further government action is needed to restore confidence in the UK economy, a business group has said.
Two-thirds of the 1,200 members polled by the Institute of Directors (IoD) saw little or no chance of Britain emerging from recession this year.
The IoD said its members wanted the coalition to do "a lot more" to boost confidence, such as simplifying taxes.
However, the IoD added that its members were happy with the government's deficit reduction programme.
On Tuesday, data showed the government was borrowing more money than planned.
The government has borrowed billions of pounds more this financial year compared with last year, despite forecasts that borrowing would fall.
The IoD survey also showed that almost half of its members had postponed investment or employment decisions this year due to uncertainty about the economic outlook.
"Business is battening down the hatches in the expectation that the recession will continue for the rest of the year," said the IoD's chief economist Graeme Leach.
The UK economy is currently in recession after contracting in each of the past three quarters.
Many have blamed the government's austerity drive, which aims to reduce the budget deficit, for undermining growth, arguing that the coalition should relax its targets for cutting debt levels.
But Mr Leach told the BBC the coalition had little choice but to cut spending; instead, he said ministers should focus on other measures to stimulate growth.
"Members are saying the government has got to do a lot more on the supply side - they support the demand side measures in the terms of the deficit reduction plan.
"It's about building confidence about the long-term prospects for the UK economy that our members are most upset about."
For example, he said the government could simplify the tax system and employment law, and reduce the "regulatory burden".
"There is no silver bullet, but all these would change business confidence," he said.
'Out of touch'
Responding to the survey, the government said it had already set out a "comprehensive strategy to achieve strong, sustainable and balanced growth, including important reforms to reduce the burden of regulation".
It said cuts in regulation had saved businesses £850m since last year, and added that it had "clearly demonstrated a commitment to simplifying the tax system".
The opposition said this was not enough.
"Month after month the country's businesses have been telling the government it is not doing enough to lift our economy out of this double dip recession created in Downing Street," said Labour's shadow business secretary Chuka Umunna.
"But out of touch and ineffective ministers refuse to listen, which is why they are losing the confidence of business."
On Tuesday, figures from the Office for National Statistics showed the government borrowed £600m in July, traditionally a good month for tax receipts. A year earlier, a surplus of £2.8bn had been recorded.
Four months into the financial year, the government has now borrowed £44.9bn, £9.3bn more than in the same period in 2011.
Analysts suggest the government could end up borrowing about £30bn more than last year, when official forecasts had suggested borrowing would fall this year.