Memo to the City: It’s time to invest
FOLLOWING the devastating financial crisis of 2008, it’s easy to understand why there was a severe drop in business investment. From peak to trough, this vital part of economic life plummeted some 30 per cent.
Since 2010, the government has been committed to helping the nation recover from the economic heart attack. By forming the coalition, the Liberal Democrats have given the country political stability. By developing and sticking to a sound long-term economic plan, we have given the country economic stability.
The return of growth, rising employment, falling unemployment and benign inflation have given the country a sense of rising confidence.
There’s now just one remaining major ingredient that needs to be added to make this recovery sustainable, and based on the rising productivity necessary for rising living standards.
Business investment. To turn the early stages of recovery into the full-on resurgence of Britain, we need your help.
Figures show that the non-financial business community is sat on cash and liquid deposits of almost £500bn.
So I issue you a challenge.
Yes, I understand why the financial crisis stopped investment in its tracks.
Yes, I understand that economic uncertainty in the Eurozone and the US made people hold off investing last year and the years before.
Yes, I understand that the investment cycle normally lags behind recovery, and that we have seen an encouraging 8.5 per cent boost in investment over the year.
But here’s my challenge. The fact that our investment levels are poor compared to our leading competitors is not due solely to the 2008 crash.
No, the problem stretches much further back – decades. If I can stretch the medical analogy, the patient was ill a long time before the “heart attack”.
For much of the period between 1960 and 2008, the share of the total economy accounted for by investment was lower in the UK than any other G7 country. For a nation with our heritage of innovation and entrepreneurial spirit, that’s not good enough.
As the Liberal Democrat minister in the Treasury, I’m committed to addressing this ailment for the long term, not just the short term. There is no quick-fix financial or monetary drug to cure this. The patient needs to have a lifestyle change.
We need to see investment for the long term become an ingrained part of our business and industrial culture. We’ve done our bit to make Britain a great place to invest: the public finances are being sorted, we are cutting corporation tax, we are investing in infrastructure and skills, and we are cutting red tape.
We can’t achieve this lifestyle change alone as government. You can’t do this alone as business. But together, we can and must achieve this sea change of attitude and investment behaviour. The economic and financial wellbeing of our society demand it. It’s a vital component in the building of the stronger economy and fairer society that our country deserves.
Your comments and report back will be welcome, valued and used.
Danny Alexander is chief secretary to the Treasury.