George Osborne, the Chancellor, has urged cash-rich British companies to start spending and investing again in order to get the country's stalling economic recovery back on the road.
Speaking to the World Economic Forum in Davos, Switzerland, yesterday, Mr Osborne said his priority over the next six months would be to create an economic environment in which companies felt confident enough to invest.
"The challenge for me is that UK corporates are sitting on cash on their balance sheets equivalent to about 5 per cent of GDP," Mr Osborne said. "What I've got to do in the next few months is to persuade them to start spending that money."
The cash reserves held by the corporate sector amount to close to £50bn, money that would be an enormous boost to an economy about to face the most serious effects yet of the Government's austerity cuts. However, economic uncertainty means chief executives have been reluctant to commit to new projects and have been quick to cut back on spending at the first sign of setbacks.
This week's dismal figures, showing that the economy shrank by 0.5 per cent during the last quarter of 2010, was thus a damaging blow to Mr Osborne's hopes that the private sector would become less risk-averse.
He acknowledged yesterday that the figures were "disappointing", but insisted there could be no slacking in the Government's focus on the deficit, pledging to continue putting Britain's "house in order".
Mr Osborne won some support for his stance from Bob Diamond, the new chief executive of Barclays Bank, with whom he was sharing the stage at the forum. Mr Diamond said: "There are not going to be jobs produced from the public sector. It is time to shift the mantle of growth from the public sector to the private sector."
The Barclays boss, who earlier this month told MPs that the time had now passed for bankers to feel "remorse" about the financial crisis, steered clear of such controversy yesterday, though Mr Osborne repeated his calls for the banks to raise lending and show restraint on bonuses.
The Chancellor said he was still confident that the long-delayed "Project Merlin" agreement, under which banks would agree to lend more while curbing bonuses, could be signed shortly. "I hope we can reach a settlement," he said, promising to give British banking his full backing in return for acquiescence. "We'll only do it if it's a good deal. I'm sure that applies to both sides of the discussion."Reuse content