GWE Business West drew more than 150 people to Leigh Court for a breakfast event which provided a rare opportunity to hear from one of the country’s most astute financial minds, Dennis Turner, the chief economist for HSBC.
The good news was that he said he thought the country could afford the predicted levels of public spending and that we should see an end to negative economic growth by the end of this year.
However, whilst his style was entertaining, his message was stark, that to compete in the global market, Britain must build on high value, technologically driven manufacturing, or as he put it: “We’ve got to do it smart because we can’t do it cheap.”
Speaking for more than an hour without notes, Dennis, gave an economics masterclass, bringing together history and current affairs and stressing the critical difference between problems with the economy and those created by the credit crunch.
“Business craves stability in the economy and for the last 16 years we have experienced a period where there has been a remarkable control over inflation and relatively low interest rates,” he said.
Those economic conditions allowed steady growth, but it was growth which was over reliant on consumer and Government spending.
“People have been building up debt to the extent that on average they now owe something like 19 months of their pay. At the same time, public spending was growing at a faster rate than the economy. It was predictable that trouble was coming and we could have provided a brake on the economy by raising interest rates as early as 2005 but that was an election year and not politically realistic,” explained Dennis.
Worsening conditions in the economy then collided with a crisis in banking, caused quite simply by many institutions lending far more than they were collecting from savers.
“It seems to me that all the economic levers have been pulled decisively, such as lowering interest rates and creating more funds to encourage banks to lend. As a result we are seeing some encouraging straws in the wind, the first rise in consumer confidence in two years and credit card debt being repaid.
“It looks to me as though we may have reached the lowest point and we may soon start to see a slow upturn. Our exchange rate is advantageous for exporters, and we have the advantage of not being in the Eurozone, which is holding back strong economies like Germany who don’t have the flexibility to manage their own affairs which we enjoy.”
“What we must now do is to improve the business environment in order that we attract companies from all over the world to do business in Britain. I think we should worry less about ownership and concentrate more on where the jobs are. The simple message is that if nobody spends then nobody earns and we should never forget that everyone’s expenditure is somebody’s income.”
