Mark Carney, Governor of the Bank of England, brought some sunshine into lives across the United Kingdom with news of the economy’s growth, lower inflation and declining unemployment.
Downsides to this news — and we have to consider them — is that growth, lower inflation and rising employment should herald a change to the very low interest rates that have helped to mitigate against inflationary pressures that we’ve had over the last few years.
The question I’m interested in is — on behalf of all businesses here in Hertfordshire — when will the Bank of England raise the interest rate? The Governor was clear that the Bank will consider a rise when unemployment falls to 7 per cent. When’s that likely to be? There is some speculation that this will be mid 2015, but perhaps a more realistic expectation will be end 2016.
There is so much riding on rising interest rates, available cash for investment, current productivity levels and household cash for spending in the economy.
What will this mean for local businesses? In a Bank of England briefing to East of England businesses a few days ago, its East of England agent, Phil Eckersley, pointed out that the lending to SMEs was contracting at a faster rate than previously; a concern for the Bank. For smaller businesses however, there has been slightly cheaper financing; credit costs have improved for them.
Business investment and intentions are showing signs of improving. Our export prospects look quite good, despite a recent dip. But we’re still not exporting our way out. What could damage our export prospects is the strengthening of the Stirling on world money markets.
New employment growth is easing back; businesses are beginning to mop up capacity to improve productivity. Companies are expecting output to increase and demand for employment to outstrip jobs. Hopefully this will be a short-lived trend, particularly here in Hertfordshire.
Wages have seen no real change. Private sector earnings are subdued; bonuses are lower too. Prices are likely to rise, but this won’t affect wages.
We are consuming more than we’re earning. This means we’re saving less, which itself means we are feeling much more confident about the future. One indicator of this is the strengthening new car market; we’re rewarding ourselves now.
For household borrowings, which affect money flow into the local economy, there have been some cheap deals on personal loan rates. Housing affordability is a key factor, and while there has been rumour of a housing market bubble in response to Help to Buy initiatives, it is thought that this is highly unlikely; although hotspot overheating might occur in one or two places, such as London.
Britain might be an island, but we’re not immune to less positive recovery headwinds from other continents. Here in Hertfordshire, we must actively encourage micro business ambition, help SMEs where we can pursue finance options such as capital grants and to recruit from the local labour pool, and constantly find ways to create jobs for school leavers.
Showing posts with label Governor of the Bank of England. Show all posts
Showing posts with label Governor of the Bank of England. Show all posts
Tuesday, 26 November 2013
Thursday, 27 November 2008
It’s a funny old world or is it?
Just when you think you’ve seen it all something else happens. A government with a Prime Minister who made his reputation pursuing Miss Prudence starts throwing money around like a lottery winner, the Governor of the Bank of England declares that nationalising the banks is an option and RBS/Nat West announce that they are going to start doing business again.
Let’s get the last point out of the way straight away. Well done RBS/Nat West, let’s hope that the others follow their example sooner rather than later. Unless and until all banks return to doing sensible business any hope of recovery is nothing more than a pipedream. I don’t mean returning to the target driven recent past where lending at any cost appears to have been the norm but a return to what many of us of a certain age would have regarded as “good business”. Sensible lending where all concerned understood the risks and where clients knew where they stood.
As for the Governors aside that nationalising the banks was “an option” something clearly needs to be done to get the them “out of neutral” but, as things stand at the moment, it would be difficult to say who would be worse, our under fire bankers or our government.
As for the measures announced this week by the Chancellor let me say that I, like everyone else in the country, really, really hope they work. Do I think they will? Well that’s another story. Actually I am far from convinced and certainly question some of the measures announced. Reducing VAT 2.5% might have some marginal impact but given the level of discounting one already sees on the High Street and elsewhere I really can’t see it having much effect.
What concerns me greatly is the thought that as the economy is recovering businesses will be hit again by increases in National Insurance. I know the so called “giveaways” need to be financed but raising NI thresholds is a measure which will ricochet around the system like a stray bullet. Adding costs to employing individuals will add to wage pressures and make businesses even more reluctant to take on new people.
Ultimately, of course, its always business that pays and I acknowledge some good things in the Chancellor’s statement. Reversing the decision to charge empty premises tax for which we have been campaigning for some time, is welcome and the increase in funding for the Small Firms Loan Guarantee Scheme (as long as the banks get behind it) will have some impact.
Overall though the statement brought out my curmudgeonly side (not usually far from the surface anyway) and I am inclined to view it in the same light as most budgets in recent memory. A mixture of “smoke and mirrors” and we’ll all pay for it in due course. If it does the trick though, along with everyone else I will be delighted.
Let’s get the last point out of the way straight away. Well done RBS/Nat West, let’s hope that the others follow their example sooner rather than later. Unless and until all banks return to doing sensible business any hope of recovery is nothing more than a pipedream. I don’t mean returning to the target driven recent past where lending at any cost appears to have been the norm but a return to what many of us of a certain age would have regarded as “good business”. Sensible lending where all concerned understood the risks and where clients knew where they stood.
As for the Governors aside that nationalising the banks was “an option” something clearly needs to be done to get the them “out of neutral” but, as things stand at the moment, it would be difficult to say who would be worse, our under fire bankers or our government.
As for the measures announced this week by the Chancellor let me say that I, like everyone else in the country, really, really hope they work. Do I think they will? Well that’s another story. Actually I am far from convinced and certainly question some of the measures announced. Reducing VAT 2.5% might have some marginal impact but given the level of discounting one already sees on the High Street and elsewhere I really can’t see it having much effect.
What concerns me greatly is the thought that as the economy is recovering businesses will be hit again by increases in National Insurance. I know the so called “giveaways” need to be financed but raising NI thresholds is a measure which will ricochet around the system like a stray bullet. Adding costs to employing individuals will add to wage pressures and make businesses even more reluctant to take on new people.
Ultimately, of course, its always business that pays and I acknowledge some good things in the Chancellor’s statement. Reversing the decision to charge empty premises tax for which we have been campaigning for some time, is welcome and the increase in funding for the Small Firms Loan Guarantee Scheme (as long as the banks get behind it) will have some impact.
Overall though the statement brought out my curmudgeonly side (not usually far from the surface anyway) and I am inclined to view it in the same light as most budgets in recent memory. A mixture of “smoke and mirrors” and we’ll all pay for it in due course. If it does the trick though, along with everyone else I will be delighted.
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