British business leaders yesterday predicted that Britain would avoid a double dip recession, despite the impact of the government’s savage spending cuts.
The Confederation of British Industry, the country’s biggest employers’ organisation, held its annual conference on Monday, the day before vital third-quarter economic growth figures showed that the British economy grew by 0.8 per cent.
Bank of England deputy governor Paul Tucker and CBI director general Richard Lambert also predicted that Britain would steer clear of the double-dip threat and strengthen its fragile recovery.
Bank leaders threw their weight behind the British government’s deficit-slashing policy, arguing that the nation would avoid sliding back into recession as a result.
“This is a critical point in time. Over the last couple of years we have lived through a crisis in the financial markets that triggered an economic crisis, that we know put real strain on many of you in the private sector,” incoming Barclays bank boss Bob Diamond told CBI delegates.
“Just as the economy started to recover, we found ourselves facing another crisis – this time a fiscal and in some cases a sovereign debt crisis – with government debts at record proportions in the developed economies.
“These deficits are a real concern given high levels of government debt, and the problem is too great to be solved by increasing taxes. It has to be managed by a reduction in public spending, and most importantly by stirring private sector growth.”
The British economy pulled out of a record-length recession late last year but some economists fear that the coalition government’s programme of vicious spending cuts could dampen recovery.
Prime Minister David Cameron launched his “strategy for growth” at the CBI conference on Monday, as he aims to help the private sector create jobs and replace those lost in last week’s comprehensive spending review.
Mr Cameron also announced a so-called national infrastructure plan that would create £200 billion (€225 billion) of long-term investment from both the public and private sector.
However, the news was not enough to persuade some CBI delegates that private companies would offset the deep job losses in the public sector.
“It’s encouraging, especially the bits about infrastructure, which is a big problem in the UK,” BT Group commercial lawyer Daniel Lloyd said.
“The big ask remains: will the private sector take up the slack from the public sector?”
Last week, Chancellor of the Exchequer George Osborne announced plans to cut half a million public sector jobs, slashing budgets and welfare benefits as the government seeks to curb an enormous deficit. Some economists estimate that another half a million jobs could be shed in the private sector as a result.