At our recent IoD Suffolk Economic Update we were joined by Tej Parikh, IoD Senior Economist, Alex Golledge, Bank of England Deputy Agent for South East & East Anglia and James Allen, New Anglia Local Enterprise Partnership’s Growth Manager
Our panel of experts comprising of Economists and Funders, specialists within their field, provided a national and local update regarding the UK economy and the challenges that businesses are currently facing during the current economic climate.
Tej Parikh, IoD Senior Economist said “While directors’ economic confidence has edged into positive territory, there’s still plenty keeping them on the fence. Positivity has been held back by rising skill shortages and the burden of complying with government regulations, and this should remind us that Brexit isn’t the only game in town.
The East of England region is a hub for research and development and has a burgeoning tech start-up community. But this needs to be nurtured and diffused by improving physical and digital connectivity, to raise the productive potential of the region, and to help alleviate the wide disparities between urban centres and rural, coastal, and post-industrial parts of East of England”.
James Allen, New Anglia LEP set out that New Anglia is the 13th largest LEP-area economy out of 38 in England, contributing £35.5bn to UK plc. Since 2010, the local economy has grown by 9.6%, faster than several powerhouses in the UK. Whilst the LEP highlighted that our employment rate is higher than the national average, this only tells part of the story as our productivity rate is comparatively low and slowing compared to other LEP areas. The LEP pulled together a robust evidence base, probably the largest ever pulled together for Norfolk and Suffolk, to drive its new Economic Strategy (published in November 2017) with clear economic indicators and set targets to measure success and drive delivery – on GVA, new homes, job creation, productivity and inclusive growth - to 2036.
The LEP is engaging businesses on the delivery of this strategy so that priority can be given to certain actions and investments to drive this vision forward. James outlined the advice role that New Anglia Growth Hub plays for businesses on the various business support programmes that the LEP funds and the progress made on the £290m Growth Deal secured by Government.
Alex Golledge, Bank of England said that The Bank of England has been providing significant support to our economy for more than a decade. They cut interest rates to exceptionally low levels during the financial crisis to support spending and to reduce the number of people out of work. And they’ve kept rates very low over recent years to help the economy recover from the global financial crisis. To use a motoring analogy, they’ve kept our foot firmly on the accelerator.
Now things are changing: the world economy is growing strongly. And here in the UK the share of people without a job is at its lowest level for more than 40 years. At the same time, we’ve seen inflation rise above the Bank’s 2% target since the big fall in the pound following the Brexit vote, which pushed up the cost of imports. Businesses typically have to pass those rising costs on to their customers. So we’ve seen higher prices in the shops.
The weaker pound also brings advantages for example, it has helped increase the competitiveness of some UK exports, at a time when demand is being supported by strong growth in Europe, the United States and other countries. This growth should encourage exporters to invest and recruit more staff. Whilst we have seen some evidence of this happening, the pick-up in investment has been weaker than we might otherwise have expected based on past experience. It is likely that uncertainty surrounding Brexit has weighed on some companies’ investment decisions. Of course, economies don’t just involve businesses. People play a vital part too.
Last November we raised the official interest rate we set, known as Bank Rate, from 0.25% to 0.5%.
Although the Bank’s Monetary Policy Committee voted to keep rates at 0.5% this month, they also indicated that, if the economy performs as expected, it would be necessary to raise them again to prevent the economy from overheating.
But they also stressed that any further rises are likely to happen at a gradual pace and to a limited extent.So, interest rates are likely to remain substantially lower than a decade ago. This isn’t a case of putting the brakes on; we’re just easing the foot off the accelerator a little. And we’re doing that because, ten years on from the financial crisis, the economy is finally returning to normal. That’s got to be welcome news for households and businesses here in Suffolk.
This event was kindly sponsored by: -