This week I have spoken to loads of businessmen and women who run everything from restaurants to a couple of farms, from a vets to a brewery. Add in a fishing equipment business, a physios, a large number number of micro SMEs, a couple of pubs and a number of cafes and I feel that is a good cross section. There is a definite feeling that we have turned a corner, albeit no one is taking anything for granted. Over 4 of the businesses spoke of bank finance problems, and inflexible / unreasonable bank managers. My overall impression is that the businesses themselves have a new confidence and some were genuinely positive. Several like the Allendale Brewery and one of the farmers spoke of significantly enhanced sales due to diversification.
For my part you know there is a recovery underway when the critics of the economic strategy change their tune from saying “austerity cannot work” and “there will not be a recovery in growth or jobs” [The Ed Balls argument]. Instead the critics now argue the government is complacent for daring to say a recovery has started, complain that living standards are not yet rising after a 5 year long period and suggest at the same time there is a housing asset bubble [Ed Balls again].
So what is happening? There is a large increase in private sector jobs, apprenticeships, and unemployment has fallen, albeit the private sector growth here in the north east - whilst still very good - is behind the south east. For the reasons for this see the Adonis Report in detail. Output is now expanding, probably at the fastest rate of the major economies. The government has been careful in how it has described this, and is far from complacent about the state of the UK economy. They stress the need to do more to raise living standards, to curb the debt and spread the growth more widely. But 1.4 million new private sector jobs is a great achievement by small businesses up and down the country.
The best news for living standards recently has been the rise of the pound against the dollar and some other leading currencies. As we import so much, a stronger pound cuts import costs and helps control inflation. The recent rises still leaves the pound much more competitive for our exports than prior to the Great Recession and credit crunch. The move to a negotiated settlement in Syria rather than a
military escalation has also helped by lowering the oil price. More needs to be done to make energy cheaper, to lower tax on working families and to stimulate more competition and cheaper prices but the evidence of a change is there.
- freezing of Council Tax,
- raising of Tax Threasholds for Income Tax,
- removing Labour’s planned Fuel Duty increases
-and creating a climate for more jobs are all helping with living standards.
It is difficult to accept the claim that we have a housing bubble in the UK. The housing market in many parts of the country still shows prices well below the 2007 peak. Transaction volume has been much lower than during the 2005-7 bubble. London is very different to the rest of the country on housing. Certainly, in the north east we do not see any such bubble. The market generally is far from overheated.