BUSINESSES need to pay their staff more so people feel wealthier before the UK can achieve sustainable economic recovery – that was the message from HSBC’s chief economist, Mark Berrisford-Smith, as he addressed York’s finance chiefs and business leaders.
He said there were “new grounds for more solid optimism than there has been for several years” while speaking at the KP Golf Club, near Pocklington, yesterday, at an event hosted by HSBC York’s commercial and agriculture banking division.
He said last month confidence indicators for business and individuals were some of the highest ever recorded, but that “recovery is not yet on a sustainable footing”.
“The biggest single issue preventing this recovery is that while it is very nice that more people are getting work, those people that worked before and still work now are more worse off.
“Wage rises are well below inflation, and most people do not expect to be better off from one year to the next.
“Rises in earnings stand at one per cent. Until that makes a decisive move towards three per cent, we won’t be able to deliver sustainable recovery.”
Stating that the supply of lending is not what it should be and corporate lending needs to increase, Mr Berrisford-Smith also said firms needed to start thinking about investment again.
He said: “The biggest thing we need to do is get earnings rising above inflation and get ordinary people spending their money again. Then exports and investments will be the icing on the cake.”
Predicting a return to “normality” by 2018, Mr Berrisford-Smith said 2013 was already better than expected with growth more likely to be 1.5 per cent compared to the 0.6 per cent predicted in the Budget.
Signs of growth are also emerging in York’s economic outlook according to business leaders in the city.
Fay Treloar, operations director at Science City York, said: “From SCY’s perspective, we are certainly seeing signs that there is now an increased demand for business support, but more encouragingly, we are seeing growth across our networks.
“In the past 12 months we have seen more than £200,000 of grant utilised by more than 82 companies in the region as part of the government’s Growth Accelerator Programme.
“The York, North Yorkshire and East Riding LEP has also received more than 80 expressions of interest for the Government’s Regional Growth Fund Business Grant Programme, which is being launched in October.
“This level of interest is extremely encouraging and a sign that there is greater stability and confidence in investment decisions in York and the surrounding area.”
Rachel Goddard, chairwoman of York Professionals, said: “Over the past few months I have observed a degree of optimism among some of the businesses represented within York Professionals.
“Some of them are starting to expand, invest and slowly increase their profit margins.
“There is definitely some warmth in the air but I think economic recovery is going to be a slow burn. We still have a long way to go and it’s vital that the Government continues to invest money and support in UK businesses to secure the economic future of Yorkshire and the UK.”