Making sure the green shoots don’t wither away

The UK may be in recovery, writes Scott Barnes, but how can we keep it that way?

Recent third quarter GDP figures for the UK showed a growth of 1.0 per cent, however when these figures were announced, many commentators were keen to point out that discounting this summer’s Olympic Games and Diamond Jubilee spending, the economy has remained stagnant year on year. Although this is a continuation of the current pessimism around the UK economy, the question is whether when you take a closer look at the situation, this is justified. 

Some recent research undertaken by us in conjunction with the Centre for Economics and Business Research (CEBR) found that mid-sized businesses have actually, for the most part, been growing well during the past few years of economic stagnation. After taking a closer look at this growth, it found that mid-sized businesses have been able to boost their productivity, with turnover per employee 18 per cent higher than the UK average, and as a result increase their turnover by £25.7bn over the past year. 

In addition, the third quarter of 2012 company liquidations were down 2.8 per cent from the previous quarter, and 6.6 per cent less than the same quarter in 2011. One of the major factors behind this is that the current low interest rates mean that struggling businesses are better able to service their loans and pay off the interest. As a result, banks are less concerned about calling the loan in. Those businesses that can’t afford to tackle the debt itself are given a bit more breathing space, allowing them to concentrate on growing revenue, rather than struggling to meet loan payments. 

The latest quarterly Business Confidence Monitor from the Institute of Chartered Accountants of England and Wales and Grant Thornton shows that business confidence is actually higher in regions outside of London and the South East. There have been some encouraging initiatives recently from the Government and it will be interesting to see how this glimmer of regional confidence is affected by the recent review by Lord Heseltine and the Coalition Government’s "City Deals" plan. Together, these schemes have called for more government funds to be diverted to regional governments and greater powers for mayors to support this entrepreneurialism and dynamism across the UK.

The pervading economic climate continues to be a proving ground for companies, with those that are still in business emerging lean, organised and efficient. Businesses are taking a fundamental look at how their business is run in order to weather the worst of the economic storm. Clear effective governance, robust planning and attention to financial levers mean they are now equipped to deal with this kind of environment. 

Before businesses start to invest again, economic confidence needs to come from somewhere, and the government must shout about how well we’re doing, and keep providing support for British businesses. If just a fraction of the estimated £720bn of cash reserves in British businesses was invested back into the economy, business investment would return to pre-crisis levels. While the "new normal" means we have to adjust our growth expectations, confidence is needed to ensure the recent economic growth doesn't just prove to be an anomaly and continues.

Green shoots. Photograph: Getty Images

Scott Barnes is the CEO of Grant Thornton UK.

Photo: Getty
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In the race to be France's next president, keep an eye on Arnaud Montebourg

Today's Morning Call. 

Good morning. As far as the Brexit talks are concerned, the least important voters are here in Britain. Whether UK plc gets a decent Brexit deal depends a lot more on who occupies the big jobs across Europe, and how stable they feel in doing so.

The far-right Freedom Party in Austria may have been repudiated at the presidential level but they still retain an interest in the legislative elections (due to be held by 2018). Both Lega Nord and Five Star in Italy will hope to emerge as the governing party at the next Italian election.

Some Conservative MPs are hoping for a clean sweep for the Eurosceptic right, the better to bring the whole EU down, while others believe that the more vulnerable the EU is, the better a deal Britain will get. The reality is that a European Union fearing it is in an advanced state of decay will be less inclined, not more, to give Britain a good deal. The stronger the EU is, the better for Brexit Britain, because the less attractive the exit door looks, the less of an incentive to make an example of the UK among the EU27.

That’s one of the many forces at work in next year’s French presidential election, which yesterday saw the entry of Manuel Valls, the French Prime Minister, into the race to be the Socialist Party’s candidate.

Though his star has fallen somewhat among the general public from the days when his opposition to halal supermarkets as mayor of Evry, and his anti-Roma statements as interior minister made him one of the most popular politicians in France, a Valls candidacy, while unlikely to translate to a finish in the top two for the Socialists could peel votes away from Marine Le Pen, potentially allowing Emanuel Macron to sneak into second place.

But it’s an open question whether he will get that far. The name to remember is Arnaud Montebourg, the former minister who quit Francois Hollande’s government over its right turn in 2014. Although as  Anne-Sylvaine Chassany reports, analysts believe the Socialist party rank-and-file has moved right since Valls finished fifth out of sixth in the last primary, Montebourg’s appeal to the party’s left flank gives him a strong chance.

Does that mean it’s time to pop the champagne on the French right? Monteburg may be able to take some votes from the leftist independent, Jean-Luc Mélenchon, and might do some indirect damage to the French Thatcherite Francois Fillon. His supporters will hope that his leftist economics will peel away supporters of Le Pen, too.

One thing is certain, however: while the chances of a final run-off between Le Pen and Fillon are still high,  Hollande’s resignation means that it is no longer certain that the centre and the left will not make it to that final round.

THE SOUND OF SILENCE

The government began its case at the Supreme Court yesterday, telling justices that the creation of the European Communities Act, which incorporates the European treaties into British law automatically, was designed not to create rights but to expedite the implementation of treaties, created through prerogative power. The government is arguing that Parliament, through silence, has accepted that all areas not defined as within its scope as prerogative powers. David Allen Green gives his verdict over at the FT.

MO’MENTUM, MO’PROBLEMS

The continuing acrimony in Momentum has once again burst out into the open after a fractious meeting to set the organisation’s rules and procedures, Jim Waterson reports over at BuzzFeed.  Jon Lansman, the organisation’s founder, still owns the data and has the ability to shut down the entire group, should he chose to do so, something he is being urged to do by allies. I explain the origins of the crisis here.

STOP ME IF YOU’VE HEARD THIS ONE  BEFORE

Italy’s oldest bank, Monte Paschi, may need a state bailout after its recapitalisation plan was thrown into doubt following Matteo Renzi’s resignation. Italy’s nervous bankers will wait to see if  €1bn of funds from a Qatari investment grouping will be forthcoming now that Renzi has left the scene.

BOOM BOOM

Strong growth in the services sector puts Britain on course to be the highest growing economy in the G7. But Mark Carney has warned that the “lost decade” of wage growth and the unease from the losers from globalisation must be tackled to head off the growing tide of “isolation and detachment”.

THE REPLACEMENTS

David Lidington will stand in for Theresa May, who is abroad, this week at Prime Ministers’ Questions. Emily Thornberry will stand in for Jeremy Corbyn.

QUIT PICKING ON ME!

Boris Johnson has asked Theresa May to get her speechwriters and other ministers to stop making jokes at his expense, Sam Coates reports in the Times. The gags are hurting Britain’s diplomatic standing, the Foreign Secretary argues.

AND NOW FOR SOMETHING COMPLETELY DIFFERENT

It’s beginning to feel a bit like Christmas! And to help you on your way, here’s Anna’s top 10 recommendations for Christmassy soundtracks.

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Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.