National Minimum Wage

National Minimum Wage
132
Figure 5.2: Consumer and Business Expectations, UK, 2004-2011
Consumer index score
130
120
110
100
90
80
70
60
50
40
2004 June
2004 September
2004 December
2005 March
2005 June
2005 September
2005 December
2006 March
2006 June
2006 September
2006 December
2007 March
2007 June
2007 September
2007 December
2008 March
2008 June
2008 September
2008 December
2009 March
2009 June
2009 September
2009 December
2010 March
2010 June
2010 September
2010 December
2011 March
2011 June
2011 September
2011 December
Consumer expectations (LHS)
Month
Business output expectations (RHS)
Source: Nationwide, consumer expectations index, and CBI, output expectations, monthly, not seasonally adjusted, UK, 2004-2011.
5.9 As part of the rebalancing of the economy away from dependence on the consumer and on
government spending, it was hoped that private sector investment and trade would pick up.
Indeed, they are the areas that forecasters, and the Government, are expecting to drive the
recovery. As we noted in Chapter 1, inventories had been rebuilt after the recession and had
contributed significantly to growth in 2010 and 2011 but voluntary stock-building was not
expected to play much of a part in the recovery in the longer-term. The path of future
investment will depend on its cost and on the prospects for the economy. Although, at 0.5
per cent, the Bank base rate has been historically low and is expected to remain so for some
time, business investment has stayed well below its pre-recessionary levels. The cost of
credit to many businesses, however, was appreciably above this rate and higher than it had
been before the recession. The interconnectedness of the financial system and the exposure
of British and other banks to the debts of many eurozone countries and banks had increased
strains in bank funding markets. These had not yet led to a further tightening in access to
credit for British business. However, small firms in particular continued to find access to
credit, particularly overdrafts, difficult.
5.10 Further, as shown in Figure 5.2, the weakened prospects for the economy and the uncertain
outlook had led business confidence to fall since the spring of 2011. As a result, many firms
had cancelled or postponed investment. In addition, despite a small boost announced in the
Chancellor’s Autumn Statement, public sector investment has also been scaled back. This
could affect the potential for growth when the economy finally picks up.
30
20
10
0
-10
-20
-30
-40
-50
-60
Business expectations balance