The UK economy is heading into a “critical quarter” and needs the Government to put its internal divisions on hold to avoid the country tipping into recession, the head of the country’s largest business organisation has warned.
CBI director-general Tony Danker has used an interview with The Journal to warn that inflation, staff shortages and supply chain issues are causing significant difficulties for many businesses.
But he added that there were also opportunities for growth in many sectors of the economy, particularly those in which the North East has significant strengths, such as clean energy and life sciences.
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And he appealed to politicians to boost boardroom confidence and encourage investment at a difficult time, rather than sapping confidence through internal Conservative Party wrangling on issues such as Brexit and the environment.
He said: “What you’ve got a lot of right now is boardrooms on pause. The test for Government and for all of us is that we need to ask, week by week, this question: is this good for confidence or bad for confidence? Does this move the needle on boardroom decisions to seal the deal or not.
“There are some good market fundamenals, depending on the sector you’re in. There’s huge growth potential in some areas and people are just looking for a bit of anchor of certainty to strengthen their elbow. The political uncertainty we now have is really unhelpful and what we need to see from politics is meeting that test on whether something is good for economic confidence or bad.
“The Chancellor has a really sound framework for this: he talks about the need to grow investment in capital, people and ideas. Him remaining committed to replacing the superdeduction with something that isn’t quite as generous but will still be an investment incentive, that’s good news. Stepping in to help with the cost of living was good for confidence too.
“But it’s the stuff of everyday politics that’s really an issue. So the Northern Ireland protocol flaring up Brexit again – we all thought Brexit was done and that was one of the great achievements of the Prime Minister, so the fact that it might re-open again, that is bad for economic confidence.
“The fact that any signs of the Conservative Party starting to go backwards on the green agenda is bad for economic confidence when there is $130trn of investment looking to go into green industries and this part of the world in particular is set to benefit from that. So suddenly having a bit of culture war fervour around anti-green measures is bad for economic confidence.
“I think the Prime Minister actually gets this and will look every week to do something that’s good for economic confidence. I know there’s a lot of politics in the Conservative Party right now but I don’t think businesses or voters will forgive the politicians for getting sucked into that in a way that saps confidence.
“I do believe this is a critical quarter. From now until the end of September will determine whether confidence is high and we avert recession or it falls and we enter one.”
Mr Danker was speaking a few days after inflation rose to 40-year highs and an influential survey warned that the economy appears to be “running on empty” as plummeting business confidence adds to mounting signs of a looming recession.
He said it was possible that the economic situation could improve by next year as labour shortages and supply chain issues ease.
But he added that without action to stimulate investment and growth, “the risk is that any downturn is far longer and deeper than anybody wants.”
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