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| George Osborne tells British business to aid recovery with more investment | George Osborne tells British business to aid recovery with more investment |
| (about 2 hours later) | |
| Britain's business elite has been told by George Osborne that it is time to put the recession behind them and get on the "front foot" in the battle to win over public opinion. | Britain's business elite has been told by George Osborne that it is time to put the recession behind them and get on the "front foot" in the battle to win over public opinion. |
| With the government eager to see economic recovery supported by rising business investment, the chancellor urged companies on Thursday to show more confidence and challenge the negative public perception of their activities. | With the government eager to see economic recovery supported by rising business investment, the chancellor urged companies on Thursday to show more confidence and challenge the negative public perception of their activities. |
| He told a gathering of 30 senior executives that the government had done its best to create an environment favourable to business and that it was time for companies to trumpet their own success. | He told a gathering of 30 senior executives that the government had done its best to create an environment favourable to business and that it was time for companies to trumpet their own success. |
| Behind the call for a stronger voice from business is government concern that the next phase of the economic recovery should be marked by a strong surge in business investment. So far, the pick-up in demand has been skewed towards consumption. | Behind the call for a stronger voice from business is government concern that the next phase of the economic recovery should be marked by a strong surge in business investment. So far, the pick-up in demand has been skewed towards consumption. |
| The chancellor told the meeting – a regular feature of the annual World Economic Forum in Davos – that the outlook was much brighter than a year ago. | |
| Osborne arrived in office in 2010 calling for a rebalancing of the British economy away from a reliance on consumer and public debt, and is now keen for companies to start boosting investment. | Osborne arrived in office in 2010 calling for a rebalancing of the British economy away from a reliance on consumer and public debt, and is now keen for companies to start boosting investment. |
| Sir Martin Sorrell, the head of media group WPP, said Osborne had told the executives present that they must stand up and promote themselves as good businesses. Sorrell added: "Actually, people who run businesses tend to want to avoid controversy rather than stimulate [debate], so it's probably quite a difficult message for some people." | |
| Ross Walker, UK economist at RBS, said that all the surveys of investment spending suggest it is going to rise, "but we are not seeing it in the data. There is a bit more optimism. If the recovery is going to be more sustainable it has to broaden out." | Ross Walker, UK economist at RBS, said that all the surveys of investment spending suggest it is going to rise, "but we are not seeing it in the data. There is a bit more optimism. If the recovery is going to be more sustainable it has to broaden out." |
| John Cridland, director general of the CBI, said: "I accept the investment cycle is only now on the turn. People were wrong when they said this would be an investment-led recovery. | John Cridland, director general of the CBI, said: "I accept the investment cycle is only now on the turn. People were wrong when they said this would be an investment-led recovery. |
| "Investment will be a lagging indicator but part of the mix for this year. We want higher capital expenditure. There are big piles of cash that can be released to fund productivity improvements in business to go alongside employment growth." | "Investment will be a lagging indicator but part of the mix for this year. We want higher capital expenditure. There are big piles of cash that can be released to fund productivity improvements in business to go alongside employment growth." |
| Lloyd Blankfein, the chief executive and chairman of Goldman Sachs, said the economic crisis in Britain's main export market, Europe, was now abating. | Lloyd Blankfein, the chief executive and chairman of Goldman Sachs, said the economic crisis in Britain's main export market, Europe, was now abating. |
| In a panel discussion on China and the EU attended by the deputy prime minister, Nick Clegg, Blankfein said: "Europe is stabilised and poised for growth." | In a panel discussion on China and the EU attended by the deputy prime minister, Nick Clegg, Blankfein said: "Europe is stabilised and poised for growth." |
| The possibility of a collapse of the single currency was one factor holding back investment in 2012. | The possibility of a collapse of the single currency was one factor holding back investment in 2012. |
| Clegg said it was vital for Britain to stay in the EU – a view echoed by Cridland, who said business understood that the potential costs of exit massively outweighed the benefits. The deputy prime minister said that Britain's population of 60m would have greater bargaining power inside a 500m-strong EU. | Clegg said it was vital for Britain to stay in the EU – a view echoed by Cridland, who said business understood that the potential costs of exit massively outweighed the benefits. The deputy prime minister said that Britain's population of 60m would have greater bargaining power inside a 500m-strong EU. |
| While some Japanese companies have privately expressed concern to the government about the outcome of a possible in-out referendum in 2017, one senior Chinese businessman said in Davos that the UK was an attractive destination. | While some Japanese companies have privately expressed concern to the government about the outcome of a possible in-out referendum in 2017, one senior Chinese businessman said in Davos that the UK was an attractive destination. |
| Wang Jianlin, chairman of the Dalian Wanda Group, said he had told David Cameron that he was intending to increase his company's investment in the UK, having already put in £1bn over the past two years. | Wang Jianlin, chairman of the Dalian Wanda Group, said he had told David Cameron that he was intending to increase his company's investment in the UK, having already put in £1bn over the past two years. |
| "The US is more [open] than the EU but in terms of countries the UK is the most open," said the head of the hotels and tourism conglomerate. | "The US is more [open] than the EU but in terms of countries the UK is the most open," said the head of the hotels and tourism conglomerate. |
| To laughter in the audience, he said that he had thought about building a five-star hotel in Davos, after complaining about his accommodation four years ago. | To laughter in the audience, he said that he had thought about building a five-star hotel in Davos, after complaining about his accommodation four years ago. |
| 'Payback time' | |
| George Osborne is not the first senior Tory to feel frustrated about the lack of "get up and go" displayed by British business. In the 1970s, Ted Heath once bemoaned that he had done everything the corporate sector had demanded to start boosting investment but companies were still sitting on their hands. | |
| Osborne expressed the same sort of sentiments on Thursday, although it appears he used a private breakfast with 30 business leaders to deliver a bit of a pep talk rather than a Heath-style tirade at business ingratitude. | |
| The chancellor has a point. Many of those munching the croissants in Davos on Thursday morning publicly backed austerity in 2010. Osborne duly delivered. They told him to stick to his guns when the economy was flat-lining in 2011 and 2012 and Osborne maintained the strong rhetoric while at the same time softening his deficit-reduction plans to help growth. | |
| Business wanted government action to get bank lending going. It called for the Treasury to subsidise mortgage lending. Osborne obliged both times. Now the chancellor, unsurprisingly, thinks it is payback time. He wants business to stop fretting about recession and start investing. | |
| That would help the government in two ways. It would broaden the recovery out from its current reliance on consumption and it would make it stronger. A surge in corporate spending this year could make forecasts of 2.5% growth look far too pessimistic. | |
| John Cridland, the director-general of the CBI, admits that investment has been slower to respond to the pick-up in activity seen over the past nine months but thinks 2014 could be the year it finally happens. Many of the objective conditions for higher investment are certainly in place. There is no risk of the economy going back into recession, the government's funding for lending scheme is now solely targeted at business, and many companiesfirms are cash rich. | |
| So what can beis holding business back? It may be that with labour cheap, there is no great incentive to invest in new capital to meet demand. Alternatively, UK business could simply be very poor at spotting investment opportunities. | |
| Larry Elliott |