More than one editor has written effective commentary on the UK’s present period of austerity, but Ruth Sunderland’s column in The Daily Mail on June 30 particularly caught my attention. Fourteen percent of shops nationally are sitting empty, she pointed out, and the figure is much higher in some areas, due to a fall in disposable income of 2.7 percent. In addition to this headwind, she says, “more potent, is the fear factor – of interest rate rises, of job loses and of fallout from the eurozone.”
This part of the column ended by referring to the “long and painful process” of rebalancing the economy and whilst agreeing with the Mail‘s associate business editor that we have about three years to go and it will be painful, although diminishing in impact, I feel that it was a disheartening analysis.
Interest rates, the eurozone and unemployment are not discouraging subjects for discussion. Interest rates will almost certainly stay down for the foreseeable future, helping mortgages and in households that have them, easing food and energy increases; and anyone employing people, or with a loan, benefits from low interest rates.
The eurozone, logically, should not now cause any serious fallout in the medium term. It is undergoing a reality check, dealing with the results of the one-size-fits-all policy and there will be no Greek default this summer. It could take up to mid-September to secure an acceptable, rounded second bailout package with public and voluntary private sector participation. This would buy time for any potential restructuring, not just of Greek debt, but of the way things are done in the eurozone and the relationships between its members. The recent talk of transferred sovereignty gives pause for thought.
The third fear factor, that of unemployment, should be allayed by the other two not materialising, but is part of the perception and reality of a recession. Aside from Central London, retail is suffering, cuts are biting and business is waiting for the impetus that says the time is right to buy and take on staff. Those spending money, great and small, will want to see that there are no significant shocks on the horizon.
We’re moving in the right direction.
Investment is one of the most important ways to energise business. It achieves growth and higher employment. US corporations are investing more. They have confidence and rightly so, that the debt ceiling will be raised and that there are good returns to be had. So hopefully, our corporate sector will follow their example. The Merlin banks have indicated that lending to SMEs will be on target by the end of August and should be kept to it. Slightly more graduates are finding employment and hundreds more mortgages were approved in May, the fourth monthly increase in succession; it’s extremely small, but moving in the right direction. Improve general confidence and that move will increase.
Stability is what growth needs and at last the times are stabilising. It is not always possible to handle a variety of far reaching issues simultaneously with any great success. We need a period of calm to consolidate the recovery, both in the UK and globally. Considerable progress can be achieved in future direction when things are going reasonably well. Stability is the key to this scenario. It offers opportunity, which leads to confidence and then to growth.
This could be a productive summer for the UK, a summer of increasing awareness of a light at the end of what has proved to be a very long tunnel. The country needs to be positive, to move beyond fear of what might happen and reach out to the improvements within its grasp.