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New cabinet gets serious about UK growth

06 September 2012

The new cabinet to focus on UK growth against a backdrop of global economic uncertainty, while the UK moves up the global competitiveness ranking.

Les Hunt
Les Hunt

The first meeting of the newly shuffled cabinet saw Prime Minister David Cameron announcing the setting up of a cabinet level 'Growth Implementation Committee' to be chaired by Chancellor George Osborne. Rather than being just another policy talking shop, we are promised a committee with teeth that will push for implementation of key measures such as deregulation and the easing of planning rules to speed infrastructure development.

Engineering Employers' Federation chief executive, Terry Scuoler said such a committee with an explicit focus on growth is a positive step in creating much-needed and improved decision making structures across government. But he's worried about the word 'implementation' which, in this particular context, he describes as the "back-end of the policy process".

"This Committee should also provide a growth check on the complete pipeline of government policies from development through to action," says Mr Scuoler. "We do need ministers to move forward quickly on growth – but we need them to do this consistently and for the cabinet to bring the whole government with it.”

A mixed message on UK manufacturing
According to the seasonally adjusted Markit/CIPS Purchasing Manager’s Index (PMI), published earlier this month, the downturn in the UK manufacturing sector appeared to ease during August, following a marked contraction in July. Meanwhile, the joint BDO/ EEF survey, tracking the past quarter performance of UK manufacturing, saw some of the toughest trading conditions since the end of the recession.

The closely watched PMI rose to 49.5, from 45.2 in July, a four-month high and only slightly below the all-important 50.0 mark that separates expansion from contraction. So, manufacturing production continues to fall, but at a less alarming rate, according to the PMI. Contrastingly the BDO/EEF survey saw the balance of responses on output over the past three months falling to its lowest level since 2009 Q4; to make things worse, the orders balance was the weakest since 2010 Q1.

EEF chief economist, Lee Hopley puts the blame squarely on a weaker global outlook precipitated by the Euro zone crisis. "Pockets of growth still remain in some sectors, but overall confidence appears to be draining away," she says, pointing to a sharp drop in export balances over the past quarter.

But there is some positive news as UK manufacturers appear to be committed to investing in their respective infrastructures to ensure their competitiveness when the upturn does eventually come. “It’s encouraging to see that companies are not planning for a further deterioration in conditions as we head into the final months of the year," says Ms Hopley. "But, the risks of a more prolonged period of weak growth in global markets, which would continue to make economic rebalancing an uphill struggle, can’t be ruled out.”

We’re getting more competitive
Despite the overall economic gloom, the UK has become more competitive, according to the latest World Economic Forum Global Competitiveness Report 2012-2013, moving from tenth to eighth position in the world ranking. Indeed, the UK was one of only four nations to improve its position in this table, as the US declined from fifth to seventh position and Germany just held on to its sixth position. Top performers were Switzerland (first) and Singapore (second) and Finland overtook its close neighbour, Sweden to take ‘bronze’.

So, reports of economic stagnation and dismal outlooks aside, we must be doing something right, mustn’t we?

Les Hunt

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