As the Chancellor George Osborne delivers his Autumn Statement this morning let us reflect on our latest education from Roger Martin-Fagg's economic update and look at the key issues and potential measures that business leaders should look out for.
The Chancellor is expected to announce a boost in growth forecasts as economic recovery starts to regain momentum. Vistage Economist Roger Martin-Fagg warns however that as it stands the recovery is not sustainable.
"All economic recoveries are consumption led, and this one is no exception. So far there has been a recovery in consumer spending on cars, eating out, hotels and construction projects"
For sustainable growth Roger suggests that we need "average weekly earnings to grow from the current 2.3% growth rate to 3.5% to 4%" and that the "Government must make moves towards a balanced budget, net exports to grow, and a recovery in investment spending, however it is financed."
So what can we expect from the statement:
- Economic Growth is Up
Roger suggests that the positive news in the media is creating a feel better, let’s go attitude, and this is the most powerful feature of the expansion.
However, "in 2014 there will not be a property boom outside of London, but as we have a consumption-led recovery the balance of payments will inevitably worsen in the next six months. Sterling however will not weaken, as markets now think the UK will be one of the first major economies to raise interest rates.”
- Business Rates Cap at 2%
This is great for business, especially high street retailers- Steve Gilroy (CEO Vistage UK/IRL) says that "A cut now will help keep open family retail businesses that have previously traded successfully, often for generations, but are now being ground-down by business rates, costly leases and online competition.”
- Fuel Duty Freeze
continuing on from his pledge earlier in the year, the Chancellor is expected to repeat his promise to freeze fuel duty until 2015.
- National Infrastructure Plan
£375bn of investment in energy, transport, communications, and water projects is planned with backing from the insurance industry.
Currently the political dialogue can be caricatured as start-ups good, big business bad – as highlighted during the party conferences.
Having an enterprising economy with lots of start-ups is fantastic, but small businesses started this year and next are not going to sustain an economic recovery, and nor are foot-loose multinationals: the economic heavy-lifting in 2014 will be done by medium-sized businesses, who have the size, expertise and resources to give momentum to the fledgling recovery through exports, investment and job creation.
The latest results from our Confidence Index suggest that we should be positive about the strength of UK's SMEs and that they are already beginning to drive this growth.
However, as Steve suggests "sustaining this will be tricky given the problems in many export markets and the lack of funding available to medium-sized businesses – who are going to be Britain’s engines of growth in 2014 – and one can hope that the Autumn Statement will address their needs".