Next week we will have a new Prime Minister with a very long to-do list. One priority should be to get the UK growing strongly again and prospects have improved, with the International Monetary Fund (IMF) providing a modest dose of good news, upgrading its growth forecast for the UK to 1 per cent this year and putting us among the faster growing of the G7 economies. Whilst a welcome shift after months of gloom, it lands at a moment when boardrooms are looking less cheerful.
According to the ICAEW Business Confidence Monitor survey, business confidence has slumped to near four-year lows as firms brace for higher costs, weaker demand and the sort of tax talk that has come to define the Andy Burnham era before it has even begun. Survey data suggests companies are already delaying investment and hiring on fears the new political regime may reach for the tax lever to fill fiscal holes.
The contrast is stark. On one hand, the IMF sees an economy that is holding up better than expected, helped by easing fears over the US-Iran conflict impact. On the other, executives say the outlook is being choked by rising labour bills, persistent uncertainty and worries that Burnham’s “room for movement on tax” could turn into a full-blown raid.
For the Government’s new ministers, the upgraded forecast will likely be seized on as proof that Britain is not in the economic ditch many feared. But in the real economy, sentiment matters almost as much as spreadsheets, and firms are still not in a celebratory mood.
The danger for Andy Burnham is that even a better growth story will not persuade businesses to loosen the purse strings if they think the tax man is looming. For now, while the IMF has raised our hopes, the business community remains unimpressed.
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