Terry Murden: Positive noises in one sector can’t lift the gloom

Technically, the economy is still growing – just – and there is every chance that we’ll avoid falling back into recession, even though unemployment will continue to rise and the austerity measures yet to come threaten to choke off demand.

No-one is pretending it is anything other than tough out there, although a significant number of companies are proving much more resilient than is commonly believed, not least in the engineering sector which is refusing to succumb.

Britain’s factories have struggled to cope with rising commodity prices and a slowdown in demand in Europe and the US. In Scotland (as we report opposite), the mood is broadly positive with companies still hiring. A big problem is finding people with the skills required (a continuing mismatch of supply and demand that is for our colleges to address).

However, the broader economy is, at best, bumping along, and the gloomy prognosis, repeated in this week’s Fraser of Allander Institute survey, indicates that it will get a little worse before it gets any better.

The typical knee-jerk reaction was for Holyrood’s opposition parties to start slinging mud at the SNP administration and accuse ministers of not doing enough to stimulate the economy. But there is little the Scottish Government can do to influence the recovery and the authors of the Fraser of Allander report would not dissent from that view.

The big levers are in the hands of Chancellor George Osborne whose Budget in two weeks time presents an opportunity for a fresh round of measures. He is coming under pressure to ease the tax burden on firms and individuals and to reveal more details of his “credit easing” plan about which we have heard little since he first unveiled it last year.

Osborne is unlikely to ease off on the austerity measures, despite the growing view that they are in danger of doing more harm than good, at least in the short term, and undermining the chances of recovery. With Britain getting the thumbs up from the credit ratings agencies and the International Monetary Fund, Osborne will not want to risk any instability by showing weakness.

He has also put much faith in the Bank of England’s quantitative easing programme which is likely to be stepped up even if it risks the likelihood of interest rates rising in the near future, as monetary policy committee member David Miles has indicated.

NBNK making the right noises over Clydesdale

The future of Clydesdale Bank is currently being carved out in discussions between its parent and that group of grandees and Scottish politicians who go by the name NBNK Investments. It could end up being run by Gary Hoffman, who was drafted in to run Northern Rock in 2008 after it was rescued by the taxpayer.

If it succeeds in buying the Clydesdale and its sister Yorkshire Bank, NBNK is expected to go easy on job losses and bring the bank back into independent ownership for the first time since 1919.

Hoffman promised the same security for staff at the 632 Lloyds TSB branches that it tried to buy in last year’s auction. He took umbrage after losing out to the Co-operative, saying that not only would he have protected all the jobs at the branches, but would also have offered 2,000 new jobs to Lloyds’ employees who were part of the wider redundancy programme.

He accused Lloyds of making the wrong decision and said there was a higher “execution” risk by going with the Co-operative.

He may yet be proved right. Reports say the Co-operative is still trying to integrate its Britannia acquisition and there have been suggestions that the Financial Services Authority will take a closer interest in how it integrates with Lloyds.

The Co-operative, however, is a £14 billion business and its bank is an established presence on the high street. NBNK is the upstart with blue-chip backing but no track record. However, it may be the only buyer for Clydesdale and is making the right noises.