James Moore: We may pay a high cost for this credit-driven boom

  • @TheIndyBusiness

Outlook With the International Monetary Fund having upgraded its forecasts for Britain's economy, the Coalition Government has another arrow to fire at Labour as it revels in the cachet of presiding over the fastest-growing economy in Europe.

See look, we made it work despite all those nasty cuts. Keynesianism? Pfah.

What gets obscured in the noise coming out of Westminster is that the recovery is built on the sand of a credit-driven consumer boom. It's a recovery financed by wonga.com, and that comes at a cost – potentially a very high one.

There was more evidence of how imbalanced the picture is from the CBI yesterday. Factory orders fell in January and manufacturing output remains stubbornly below the levels it reached in 2008.

Put simply, Britain consumes too much and makes and exports too little, leaving us with an economy that is rather shakier than would appear.

Now it is true that the CBI's industrial trends survey did show that manufacturing prospects for the coming three months are at their strongest for some time. It's the future that economists worry about, not what has already happened, so this is indeed good news.

But manufacturing is a long way from being in rude good health. It needs support, and it needs it rather urgently if an imbalanced recovery isn't to tip over.

So do other areas, such as the all-important small-business sector. On that front, a start might be following the advice of the House of Commons Public Accounts Committee, which would like to see a confusing array of initiatives, often introduced piecemeal, brought under the umbrella of the new business bank to provide some level of control and direction.

That might serve as a statement of intent from a Government whose economic policy has seemed to revolve around curing one big sickness – the deficit – to the detriment of a host of other ailments which could still turn very nasty if left untreated.