Britain’s latest economic data have been better than expected. While August’s retail sales figures were the weakest in four months, activity in the manufacturing sector hit a four-month high, according to the Purchasing Managers’ Index (PMI) survey.
Meanwhile, activity in the services sector, which accounts for 75% of the economy, reached a six-month high. The government said that it was working on plans to set up a bank for credit-starved small businesses, changes to the planning system and a scheme to encourage residential construction.
What the commentators said
The economy is “clawing its way out of recession”, said Martin Beck of Capital Economics. The weighted average of the latest manufacturing, services and construction surveys points to quarterly growth of just 0.1%. The outlook isn’t especially inspiring either. Recent increases in mortgage rates, oil and petrol prices and utility bills are eroding real incomes, militating against a strong increase in spending by indebted consumers. The deepening recession in the eurozone isn’t helping either.
Hence the calls for the government to come up with ideas to “inject more pep into the British economy”, said the FT. But so far “the radicalism of the government’s language belies the modesty of its proposals”. Creating a small business bank to bypass “damaged mainstream lenders” could be helpful. But as the plan stands it will be “more of a call centre” for those looking to use existing government schemes, such as the Funding for Lending programme. And if “these schemes are inadequate”, how will promoting them better help?
In any case, many businesses remain “too wary to borrow”, added The Independent. The government will have to muster more political will than it’s shown so far if it is to stare down rural protection campaigners who will try to block changes to the planning system. It will also need firmer resolve if it’s to kickstart a housebuilding programme using government guarantees.
All this is just tinkering, said Allister Heath in City AM. “Corporatist” government-centred schemes aren’t a recipe for sustainable growth. We need a free-market, supply-side revolution, with lower taxes and public spending. Instead the deficit is climbing and red tape increasing. Britain is being held back by “Liberal Democrat intransigence and the prime minister’s lack of vision”.