Eurozone problems increases pressure for more QE, but encouraging business lending would be more effective
Commenting ahead of the MPC decision tomorrow (Thursday), David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“Most analysts expect the MPC to maintain its current policy at the June meeting, with interest rates staying at 0.5% and the Quantitative Easing (QE) programme at £325bn. However, demands for more QE have started to rise due to the worsening crisis in the Eurozone and signs that the US and Asian economies are slowing. More QE will have only marginal effects in boosting growth. But if the pressure facing Spanish banks puts the UK financial system at risk, an increase in QE may be necessary. In the meantime though, the MPC should focus on boosting the flow of credit to businesses.
“Weaknesses in business lending can be best addressed by the creation of a fully-fledged business bank. The MPC can also help by reconsidering its reluctance to purchase assets other than gilts, such as securitised SME loans. This would make the banks less risk averse and would help to remove one of the main obstacles to sustaining a recovery in the UK. We believe that if the MPC purchased private sector assets, this would encourage growth, rather than increasing irresponsible lending or interfering with credit allocation.”
The Government understands the importance of trade and investment to delivering long-term growth and prosperity in the UK and around the world. The Government’s strategy on trade and investment was detailed in the White Paper, “Trade and Investment for Growth”, which was published in February 2011.
The White Paper identified three key goals:
help UK business trade and invest more and in new markets
attract investment to the UK
strengthen the multilateral trading system, including helping developing countries benefit from trade and investment.
ONE YEAR ON….
It has been just over a year since the Government launched the White Paper. Led by the Department for Business, Innovation and Skills, and working closely with UK Trade and Investment and the Foreign and Commonwealth Office, the White Paper advocated a whole of government approach to trade and UK growth.
The Minister of State for Trade and Investment, Lord Green, has recorded a short message to acknowledge some of the achievements and challenges of the first year of implementation
Lord Green also said:
“We’re now one year on from the launch of the White Paper. I am pleased to report that we have laid much of the necessary groundwork and made some real progress. However, we are taking a long term approach and our strategy cannot be secured in just one year; this is a marathon, not a sprint.”
“Trade and investment are absolutely fundamental to rebuilding and rebalancing our economy. The UK has a strong history as a trading and investing nation and continues to be one of the world’s most attractive places to do business, but the world is changing and we cannot be complacent.”
“Encouraging businesses to export more is at the very heart of our approach. We need to ensure business, especially our small businesses, have all the tools they need to flourish, that we strengthen and improve our relationship with trade partners around the world, that we fight protectionism and ensure poor countries can benefit fully from free and fair trade.”
In supporting trade and investment in 2012, the Government will prioritise five key areas of activity:
1) Roll-out of the SME exporting campaign, to double outreach to companies to 50,000 per year by 2015 over the next few years.
This will see conferences in every region of the country; active engagement with support networks; targeted support of SMEs at trade fairs and on trade missions; and e-networking of SMEs to support mentoring and experience-sharing.
2) Marketing high value opportunities in fast growing markets
This will involve an ambitious programme of conferences and other country-specific activities, along with trade missions for key sector providers, including SMEs.
3) Showcasing inward investment opportunities, especially in key economic infrastructure developments and building on our world-class science base
This will include more proactive identification of major overseas investors; special programmes for strategically important countries; and a major and sustained client marketing progress.
4) Working to ensure a supportive financing environment for exporting and investment
This means close engagement with banks on trade finance; expanding UK Export Finance marketing efforts; and active marketing of international venture capital providers and angel investors.
5) Seizing the one-in-a-lifetime potential of the London 2012 Olympics and Paralympics through a major international business programme aimed at boosting British exports and attracting inward investment
Over the coming months they will also:
Support the EU to conclude Free Trade Agreements with India, Singapore and Canada; and open negotiations with Japan
Agree more elements of Doha; and
Find ways to press forward the international trade agenda with like-minded countries.
The Government’s commitment to open trade and investment is ambitious and long-term. It has already secured some key achievements. Their focus now is to build on this, and ensure the UK’s future prosperity
On 30 May Charles Bean, Bank of England spoke to a packed Norfolk Chamber Breakfast at Norwich City Football Club. It was a terrific opportunity for him to speak with local business people and it is great that the Chamber are able to bring their members closer to organisations such as the Bank of England.
To read more on Charles’ view on the Norfolk economy, click here
In spite of the volatility caused by the international financial crisis, developing nations remained the key drivers of growth in international trade for 2011, according to the International Chamber of Commerce (ICC).
South Asia exports, driven by soaring Indian trade with China, outperformed other developing regions in the first three quarters of 2011, but subsequently plummeted.
This year’s ICC Global Survey on Trade Finance, Rethinking Trade and Finance, notes that, after a year of upheavals, annual trade volume growth for 2011 was 6.6%, slightly above forecasts by the World Trade Organization.
However, after positive growth prospects at the beginning of the year, a series of global shocks, including the Arab Spring, the tsunami in Japan and the continuation of the global debt crises, resulted in an uneven performance for the year.
The ICC survey, which provides some of the most important international data on trade finance, suggests that the current environment is dampening prospects for 2012, with annual trade growth forecast at 5.2% this year, increasing to 7.2% in 2013.
The report – in which representatives of 229 banks in 100 countries took part – reveals that China’s trade experienced particularly volatile growth throughout the year, and exports from East Asia have fallen.
Many major developing countries in the region are experiencing a slowdown in growth due to a tightening of domestic policy initiatives introduced between late 2010 and early 2011 to combat high inflation.
The eurozone meanwhile was strongly affected by the financial and economic crises and, down 5.85%, had the highest annual decrease in export traffic.
With an employment rights report, commissioned by the Prime Minister from a leading venture capitalist,a second publication has appeared with the aim of making life easier for businesses.
The TaxPayers’ Alliance (TPA) and the Institute of Directors (IoD) have put forward a comprehensive plan for growth which they describe as the culmination of 18 months’ evidence gathering by the 2020 Tax Commission and the start of a major new campaign.
A joint project by the TPA and IoD, the Commission in its final report calls for “radical but realistic reform” of the UK tax system including the abolition of eight taxes and the creation of just one – a Single Income Tax.
According to a full analysis of the proposals by the Centre for Economic and Business Research (Cebr), a leading economics consultancy, the changes would increase GDP by 8.4% over 15 years – equivalent to an additional £5000 per family in 2012-13.
Among other recommendations, the report suggests that marginal tax rates should not exceed 30%, and the personal allowance should rise to £10,000. Taxes on capital and labour income “disguised as business taxes” should be abolished and replaced with a tax on distributed income.
Furthermore, transaction, wealth and inheritance taxes should be abolished while transport taxes should be cut.
Income Tax and Employees’ and Employers’ National Insurance should be merged into a single tax on labour income, with rates levelled down so that certain groups do not face higher bills.
Corporation Tax and Capital Gains Tax should be replaced with a single tax on capital income – dividends, interest and rent – at a rate of 30%.
Allister Heath, Chairman of the 2020 Tax Commission, concluded: “It is time for Britain to make a vital choice between tweaking the status quo and letting our economy continue to be crippled by complex and punitive taxes, and drastically changing course with a radical but realistic plan for a tax system fit for the 21st century.”
Food and Farming Minister Jim Paice has recently visited China on a mission to open up trade for Britain’s farming, food and drink sector.
“Food and farming already plays a vital role in the UK economy but I believe there are still great opportunities for growth in emerging markets like China,” he explained. “We need to keep ahead of the game by developing strong trade relationships with the world’s second largest economy.”
China’s growing middle class is increasingly buying foreign food and drink, seeing it as aspirational and recognising its high quality.
Whether it is Scotch whisky or frozen lobster, artisan crisps or malt drinks, an increasing number of British favourites are becoming supermarket staples, the Minister claimed.
He was looking to build relationships with key retailers and importers to smooth the path for British producers looking to make their mark in China. At the same time he was also promoting high quality breeding pigs from UK producers.
China is the world’s biggest market for pig meat and, at the end of his visit, the Minister announced a £50 million trade deal to sell British pork.
As well as the trade in breeding pigs, Mr Paice promoted the skills and technologies available in the UK to support breeding programmes, which have the potential to be even more lucrative.
The World Trade Organization (WTO) seems incapable of bringing its members together in a binding agreement to complete the Doha round of trade talks, and yet countries are still queuing to join.
In September 2003, talks being held in Cancun, Mexico, collapsed in the face of irreconcilable differences between rich and poor countries. In December 2005, another make-or-break WTO meeting failed in Hong Kong.
Director-General Pascal Lamy reported to the WTO General Council on 1 May 2012 that, with regard to the Doha Round, “my conversations over the past few weeks with Ministers and delegations have provided me with a sense that Members wish to continue to explore any opportunities to gain the necessary traction and make tangible progress soon”.
So not yet dead, but certainly not about to come to a conclusion any time soon.
Nevertheless, the WTO remains open for business and countries continue to make their way through the long accession process, with the two most recent recruits being Montenegro and Samoa.
They have become respectively the WTO’s 154th and 155th member after both informed the WTO that they had accepted their membership package. Under WTO rules, a country becomes a member 30 days after national ratification.
As part of their accession commitments, both have agreed to further liberalise their trade regime and to accelerate integration in the world economy. The countries have also pledged to provide a transparent and predictable environment for trade and foreign investment.
Samoa has promised to fully implement the WTO Customs Valuation Agreement by June 2012.
See the WTO website for details of the accession package agreed by both countries.
The Government has received 269 bids from employers looking to take part in a new pilot to design and develop their own vocational training programmes, Skills Minister John Hayes has announced.
The Employer Ownership pilot invited the first round of bids earlier in the year for a share of the £250 million fund which will aims to channel public investment directly to employers so that they can invest in the training and skills development they need to develop their business.
“Skills are central to the UK economy and our long-term competitiveness,” Mr Hayes said, “and we’re making excellent progress with the biggest apprenticeship programme in modern history. That’s why the Government has put building workforce capabilities through training at the heart of our economic strategy.”
Testing the impact of greater employer ownership of the vocational training agenda is the key objective of the pilot, he explained.
The vision of greater employer ownership has been championed by the UK Commission for Employment and Skills (UKCES) – a non-departmental public body that provides strategic leadership on skills and employment issues.
Its Chairman, Charlie Mayfield, said: “The pilots are all about encouraging innovation and partnership in an area that is critical to the growth and success of our economy. I look forward to seeing what changes we can start to make as a result of these investments.”
The winners of the bids will be announced later in the year.
On 16 May 2012 the European Union published an amendment to the EU Dual-Use Regulation (Council Regulation 428/2009). The amendment which is made in Council Regulation (EU) No 388/2012 amends the EU Dual-Use List. The new list comes into force 30 days after publication (ie on 15 June 2012).
On this date, the ECO will re-publish the “UK Strategic Export Control Lists: the consolidated list of strategic military and dual-use items that require export authorisation”. This listing is integral to UK strategic export control legislation. You need to refer to this listing whenever you need to determine whether your goods need an export licence.
The amendments are wide ranging from text changes to decontrols of certain specified items.
publication of revised Control List on 15 June 2012.
subsequent amendments to be made to a number of dual-use and transhipment open licences
comprehensive change note summary list detailing text change amendments
All exporters of dual-use items are advised to read the attached notice carefully and make themselves aware of any list changes that potentially impact on their business. You also need to ensure you ensure you refer to the updated Control List (when amended on 15 June 2012).
Depending on the exact nature of your business activities, you might also subsequently need to either apply for or de-register from export licences as appropriate.
The latest edition of a newsletter on Mutual Recognition Agreements (MRAs), concluded between the European Union and non-EU countries, has been published.
It provides information on the current status of MRAs with the USA, Canada, Japan, Switzerland, Australia and New Zealand, as well as on the Agreement on chemical Good Laboratory Practice with Israel.
This has been compiled from a trade perspective and also includes an overview of the Agreements on Conformity Assessment and Acceptance of Industrial Products (ACAAs) currently agreed and under consideration with countries in the European neighbourhood.
The latter covers 16 partners to the east and south of the EU’s borders, namely Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova, Morocco, the occupied Palestinian territory, Syria, Tunisia and Ukraine.
Traditional MRAs enable Conformity Assessment Bodies (CABs) nominated by one Party to certify products for access to the other Party’s market, according to the other Party’s technical legislation.
They provide for the mutual recognition between trading partners of mandatory test results and certificates for certain industrial products.
No regulatory convergence is implied by a traditional MRA. In other words, there is no implication that the regulations imposed on products by the Parties are to be brought into alignment at any stage.
As far as the EU is concerned, no further traditional MRAs are foreseen, but there is a certain amount of evolution in their operation, for example, as amendments to their scope are considered and as mandatory certification gives way to reliance on suppliers’ declarations of conformity.
Accordingly, it is intended that this newsletter will be issued from time to time to reflect the evolution of the current position.
John Morse, Operations Director of marine survey company Gardline, has been appointed as new Vice President of Great Yarmouth Chamber Council.
Commenting on his appointment, John said: “I am very excited to take up this new role. As an employee of Gardline, which is one of the largest Great Yarmouth employers, plus my previous relevant experience, I will be able to contribute to the Chamber’s forthcoming development and help to support this vital industry sector.
“I believe there should be a concerted effort to regenerate a new economy in Great Yarmouth, based upon the offshore renewables and other related opportunities. An economy such as this will provide long-term employment, net inward migration and general viability away from, but parallel to its traditional tourism base.
“I think it should be the responsibility of every Chamber member to provide support and direct mentoring to businesses in Great Yarmouth, and in collaboration, we should all strive to generate a strong, vibrant, and expanding business environment for the town.”