The Bank of England has today left interest rates unchanged amid continued global uncertainty. As has so often been the case recently, there was a significant divergence in views around the MPC table – itself a testament to the uncertainty surrounding the economy and in particular, war and inflationary pressures, leading to significantly rising input prices.
Business owners don’t need the Bank of England to tell them that prices are spiralling beyond the sustainable. We experience it every day: in wages, energy, raw materials, insurance, taxes, borrowing costs and supply chain costs. The pressure on margins remains intense and the temptation to milk business for everything it’s worth appears to be ever-present. As one member of our network put it to us the other day, “if you were going to design an industrial policy to make it as tough as possible to compete, it would look like what we’ve got at the moment”.
The consequence of global uncertainty is… uncertainty at home. Uncertainty causes business owners to sit on their hands more. Investment is delayed, recruitment slows and growth plans are put on hold while firms wait for greater confidence. And… the multiplier effect is nowhere to be seen as there’s nothing to multiply.
The new Prime Minister Andy Burnham’s comments about rebalancing and regrowing the economy are welcome. But even beyond the refreshingly welcome words – in themselves a step forwards – the challenge is not simply one of action—it is one of co-ordinated action.
In a world of ever-constrained public finances, government cannot spend its way to prosperity. We need innovation, collaboration and new approaches to economic development. We need to oil the wheels of wealth creation by bringing together business, universities, local government and the wider public sector around shared objectives, but most importantly, around the agenda of business people, not of policy makers and their imaginings, or failed custom and practice.
The thing is, co-ordination only really works if the voice of business is front and centre in policymaking and their is a genuine desire to act on what is brought to the table. Businesses are the ones making investment decisions, creating jobs, developing new products and generating the wealth that funds public services. Their experience needs to shape policy from the outset, not simply be consulted after decisions have already been made.
Genuine needs for sharing prosperity have for too long been made to be subservient to political ideology. For way too long, the country has been pulled from one direction to another as governments and political priorities change. The roots of the current malaise in industry can arguably be traced back to the 1960s, with mis-steps in the 70s (“nationalisation”), 80s (“de-industrialisation” and 90s (“knowledge / service economy”). The economy needs greater consistency, a longer-term perspective and a shared commitment to the national interest.
The ambition to grow the economy is widely shared. The opportunity now is to match that ambition with coordinated delivery, business-led policymaking and a long-term approach that gives employers the confidence to invest, innovate and grow.
#strongertogether
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