Britain 'needs a recovery by Germany': Clarke warns as high street spending improves sharply

KENNETH CLARKE, the Chancellor of the Exchequer, warned yesterday that it would be difficult for Britain to sustain its recovery without a revival in the German economy. His comments came as a survey by the Confederation of British Industry showed a big rise in high street spending last month.

More than half the retailers questioned in the latest CBI distributive trades survey said sales volume in June was up on a year earlier, with fewer than a quarter reporting that volume had fallen. This was a sharp improvement on the previous month and a more buoyant picture than at any time for more than three years.

But the CBI warned that trade had been boosted by an early start to the summer sales, with the patchy improvement concentrated in large stores. Smaller chains and single-store retailers still reported trade more depressed than a year ago.

Grocery, clothing, furniture and chemists saw the fastest sales growth, with off-licences and hardware stores the most depressed.

Nigel Whittaker, chairman of the CBI's distributive trades panel, warned that although retailers expected July to be another good month they had been over-optimistic in recent months. Official figures for June retail sales will be published tomorrow, with City analysts expecting a rise of 0.3 per cent on the month.

Mr Clarke issued his warning about the need for a German recovery in Frankfurt before meetings with Hans Tietmeyer, president-designate of the Bundesbank, and Theo Waigel, the finance minister. He said German businessmen to whom he had spoken were 'pretty optimistic about a German recovery next year'.

Mr Clarke did little to dampen speculation in Britain about a widening of the value-added tax net to cover some zero-rated goods. While stating that there were 'currently no plans to expand the VAT base in the UK', the Chancellor added: 'I must keep all my taxation options open.' He said the Government's principal job was to see improvements in public finances.

'Keeping interest rates down in the UK, and no doubt in Germany as well, will also depend on our success in tackling fiscal deficits,' he said.

The Chancellor denied he had any intention of exerting pressure in favour of further cuts in German interest rates. He expressed understanding for the German point of view, and especially its problems with inflation.

'I have more time for the Bundesbank than many of my political colleagues at home,' he said.

But, coincidentally, hopes of a cut in official German interest rates on 29 July were boosted by Bundesbank repurchase agreements to drain excess cash from the money market. These suggested the Bundesbank would cut its key 'repo' rate from 7.28 to 7.15 per cent this week, heralding a cut in the offical discount rate - the floor for market rates - later in the month.

The Bundesbank's move helped to calm recent turmoil in the European exchange rate mechanism, with the Danish krone and French franc enjoying a quiet day.

Mr Clarke said it would be helpful if German interest rates were to come down, but this would not necessarily be followed by an easing in British base rates.

He vigorously defended Britain against accusations from some quarters in Germany that it is seeking to gain a competitive edge by turning itself into a low-wage country.

Developing the theme of a speech he was to give later in Munich, Mr Clarke said Britain believed in well- paid, high-technology industries and a high standard of social provision, but this should not be confused with those twin enemies of growth, rigid markets and excessive costs. The most important issue facing the European Community was job creation.

'Labour markets are the crux of Europe's economic woes - over-rigid, over-regulated and over-priced,' he said. The first step for EC governments must be to look at the extra costs forced on business through excessive regulation.

Businesses all over Europe had warned governments that more social charges would kill enterprise and kill employment. In opposing the Maastricht Social Chapter, Britain was speaking out on behalf of the unemployed throughout the EC.

View from City Road, page 22

PROMOTED VIDEO
Arts and Entertainment
musicBand's first new record for 20 years has some tough acts to follow
News
peopleAt least it's for a worthwhile cause
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
News
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
Life and Style
Sexual health charities have campaigned for the kits to be regulated
healthAmerican woman who did tells parents there is 'nothing to be afraid of'
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments