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Business Chiefs Fear For UK Economy
by John de Roe.

The Daily Stirrer brings you opinion and comment on issues in the news that are likely to affect the lives of ordinary people. We therefore focus on economic matters, prices and inflation, jobs and unemployment, health, diet, education and social comment.
Today's report highlights the concerns of business leaders who, while supporting the coalition goverment's austerity measures aimed at controlling the rinaway public sector deficit are worried that inflation and the crisis in the euro zone may still derail the economy.

Business Chiefs Fear For UK Economy
by John de Roe.
2011-04-09
CREATIVE COMMONS: Attribute, non commercial, no derivs.
KEYWORDS: money, business, finance, infalation, debt, economy, jobs, living standards, budget, cuts, spending, deficit

Many UK business leaders, including some who backed chancellor George Osborne's spending cuts, have said they have growing concerns about the state of the economy, warning of weak growth and rising inflation ahead.

Former Conservative adviser Archie Norman and ASDA CEO, now chairman of ITV, said the government's growth targets were over optimistic. The former Asda boss joined Carphone Warehouse founder Charles Dunstone, Next retail chain chief Lord Wolfson and Yell chairman Bob Wigley in forecasting tough times ahead as soaring inflation dents consumer spending power, although they all express continued support for George Osborne's austerity measures.

The businessmen's concerns centre on the ability of the private sector to create as many jobs as hoped. "I don't think the private sector is going to be able to pick up the slack in this climate," Andy Bond another former ASDA boss said.

Bond, who ran the UK's second largest supermarket chain for five years, forecast a two-year "retail recession" earlier this week.

He was one of the 35 names who signed a letter to the Daily Telegraph six months ago backing Osborne's plan to slash the deficit and arguing that businesses "should be more than capable of generating additional jobs to replace those pruned from the bloated public sector".

The problem we have is that any further expansion of the public sector by creating candy floss jobs for tax eaters adds to the burden of public spending but allowing unemployment to rise does the same. The Bank of England could easily curb inflationary pressures in the economy by raising interest rates but that would also increase unemployment and might also act as a restraint on enterprise. The purpose of slashing the interest rate at which the central bank lends to commercial banks to an insanely low level ( 0.5%) was supposed to boost the economy and re ignite the housing market but it has failed to do so.

Unfortunately to raise interests rates now would have a further negative effect on house prices and probably lead to more repossessions. Although the recovery (as the government likes to call what has become a slump) so far has been weak and faltering we have to stick with the deficit reduction policy. To do otherwise would lead the UK towards the same financial abyss as Iceland, Ireland, Greece and now Portugal have fallen into . If on the other hand we returned to the loonytoons economics of the last Labour government and the utterly inept Obama administration in the United States, living standards would deteriorate even further."

Rocketing prices for oil, essential commodities like copper and iron cotton and staple foods such as what and beans in world markets are adding to price pressures that have sent inflation to 4.4%, more than double the Bank of England's target. These increases are caused by the rising demand from developing economies like China, India, Brazil and Indonesia exacerbated by political unrest in the Middle East.

The businessmens' warning comes at the end of a week in which major high street names including Halfords, HMV and Mothercare have reported falling sales and wines and spirits chain Oddbins has gone into administration. The illusory nature of the recovery is spelled out by the number of public companies warning of falling profits and reduced dividends.

Inflation is the biggest problem Squeezing incomes as prices rise is never going to be a popular or easy course. An increase in VAT has not made the government's measures easier to bear either. The alternative however, of printing money to service debts, is worse both for business and the public.

This perfect economic storm, predicted by The Daily Stirrer in 2009, means prices are rising across the high street. Next has pushed its prices up by 8% while at Marks & Spencer the average is 6%. To keep a lid on inflation, Marks & Spencer is looking to shift some of its manufacturing out of China to central Asia where manufacturing costs are lower.

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