Leaders: Business boost sends encouraging signals

AFTER so many baleful warnings from the Confederation of British Industry about poor economic performance and rock-bottom business confidence, news that it has lifted its forecast for this year and next is truly encouraging.

A broad-based economic recovery does now seem to be under way. The CBI, Britain’s biggest business lobby group, has lifted its forecast for growth for this year from 1 per cent to 1.2 per cent, and reports signs of a pick-up in business confidence and optimism. It has also raised its forecast for 2014, from 2 per cent to 2.3 per cent in the expectation that increasing disposable income and business and housing investment will boost demand.

Arguably, the most heartening component of its forecast is that business investment, lamentably weak since the onset of recession and set to fall by another 2.8 per cent this year, should rebound by 7.3 per cent in 2014.

The CBI is by no means alone in lifting its growth projections: almost all independent forecasting groups have done so in recent weeks. And in Scotland this recovering confidence is set to be echoed in the latest Business Trends report due out today from accountant and business adviser BDO. Its output index climbed to a 26-month high in July, the fifth consecutive monthly increase, with improvements registered in both the manufacturing and services sectors. It also notes that rising confidence is feeding into businesses’ employment intentions.

However, few will need reminding that this is a pick-up from a very low base, that this recovery has been the slowest to emerge in the post-war era and that output is still some way below its pre-financial crisis peak. A credible recovery needs firm evidence of a resurgence in bank business lending, particularly to the small firms sector, and a return to growth in business investment.

Britain’s leading firms are currently sitting on a huge cash pile as they have been reluctant to commit funds or have lacked investment propositions sufficiently attractive to merit spending. As a result, major doubts still surround the quality of this recovery and in particular the chancellor’s ambition to secure a rebalancing of the economy towards manufacturing and exports. We need to see more than yet another debt-fuelled house price boom.

Attention also needs to be paid to the changing nature and composition of our business base. The economy that returns to growth will be different to that which hit the rocks in 2008, with a notable rise in micro firms and e-businesses brought about by the uptake of digital technology.

As for the public finances, the UK debt total continues to rise and now stands at more than £1.2 trillion, and with the most difficult reductions in public expenditure still to take effect. For these reasons, there is still cause for caution. But the evident recovery in business confidence cannot be other than wholly welcome.

Ed needs new tune to banish the blues

This summer may have been hot for most for us, but for Labour leader Ed Miliband it has been decidedly cool. Last week’s egg-throwing incident epitomised a restlessness among Labour MPs and supporters that their leader is not as robust and aggressive as he needs to be in countering Conservative attacks and in setting out a new purpose and strategy for Labour.

The party’s former deputy leader, Lord Prescott, says the party is failing to get its case across and urged Mr Miliband to “kick out” under-performing shadow cabinet members.

Shadow health secretary Andy Burnham says Labour must produce attention-grabbing policies by next spring or risk losing the 2015 election. Former whip Graham Stringer talks of a “deafening silence” from the shadow cabinet at a time of year traditionally ripe for the opposition to attack the government.

A lot of this can be seen as “silly season” politics, and with millions of voters on holiday is unlikely to make much of an impact. Mr Miliband’s leadership cannot be said to be in serious danger, though questions are being raised about his leadership abilities and his capacity to command loyalty and discipline among his backbenchers.

And there is no doubt that an improving economy, an upturn in confidence and the fracas over the political influence of Unison have helped the Conservatives and put Labour on the back foot.

The real test will come with the party conference season next month. Mr Miliband will not only have to display some signs of imaginative policy thinking but also put on a robust and rousing personal performance to shake the party out of what has evidently been a summer of blues.