View from City Road: Britain in the pink
Friday 06 August 1993
The main problem, as always, is that the balance of payments is the small difference between two much larger numbers. The bulk of the 1992 revision stems from higher-than-expected net inflows of interest, profits and dividends from investments overseas. Part is the result of big losses by overseas investors in Lloyd's, with last autumn's currency turmoil also making the provisional figures for portfolio investment unusually unreliable.
Measuring these flows of investment returns has always been difficult, especially since exchange controls were abolished in 1979. The abolition of customs controls within the EC at the beginning of this year means the figures for trade in goods will now also have to be taken with a large pinch of salt.
But these difficulties do not obscure the underlying problem with Britain's trade account. Uniquely for a post-war recession, the economy has been unable to escape from deficit despite depressed import spending. In the short term, foreign investors will finance the deficit by lending money or buying our assets. But their appetites for sterling are finite. And the deficit is likely to swell as the recovery gathers pace.
A sustainable recovery will have to be built on investment and exports, with consumer spending remaining much more subdued than it did in the 1980s. This rebalancing of the economy requires a further rebalancing of policy: low interest rates and a competitive exchange rate, combined with higher taxes and cuts in public spending. Any other course will put the recovery itself at risk.
The magicians using online collaboration to push boundaries
Jennifer Lawrence attacks mass media again over body image
Paris charity auction staged to save the ancient city of Tyre
scienceScientists find the answer to a question that even puzzled Darwin
A very timely Great Train Robbery and a frantic 24 Hours in A&E among the highlights
Jennifer Lawrence: 'It should be illegal to call someone fat on TV'
Colin Farrell reveals ‘affair’ with Elizabeth Taylor: 'She was my last romantic relationship'
Ian Watkins: Paedophile Lostprophets singer sentenced to 35 years for child sex offences, as judge labels him a 'dangerous sexual predator'
Children evacuated from swimming pool after prosthetic leg mistaken for paedophile
Devyani Khobragade: India-US row escalates over arrest of diplomat in New York
- 1 America's 'virgin births'? One in 200 mothers 'became pregnant without having sex'
- 2 Sun will 'flip upside down' within weeks, says Nasa
- 4 Christmas has come early: Justin Bieber announces he's 'retiring from music'
- 5 Children evacuated from swimming pool after prosthetic leg mistaken for paedophile
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