£754bn Boardroom hoarding is strangling UK economic recovery
UK Business is strangling the economic recovery by hoarding a £754billion cash pile, equivalent to 50 per cent of the size of the British economy, according to a leading forecasting group.
By refusing to invest and create jobs, these corporations, which do not include banks or similar institutions, 'are acting as a massive drag on the economy', the independent forecasting group the Item club has claimed.
Partly as a result, this year's growth will come in at a paltry 0.4 per cent, down from the 'depressing' 0.7 per cent seen last year, Item will claim.
The club, which is sponsored by accountant Ernst & Young and uses the Treasury's own computer model of the economy, places a big part of the blame on corporate treas-urers.
'The growth in British business investment this year is likely to be similar to last year's 1.2 per cent, leaving it 12 per cent below the level it reached in 2008,' Item will warn.
'Consequently, the economy is bleeding cash into company coffers at an alarming rate. This is sapping the strength of the economy, keeping it on the critical list.'
The business sector's annual financial surplus will rise from 5.2 per cent of GDP in 2011 to 5.6 per cent in 2014, according to Item. The total cash in the bank is already £754billion, equivalent to about half of Gross domestic product
Item economic adviser Professor Peter Spencer of York University said the Government was betting on the private sector to drive the economic recovery, but there was little sign it was rising to the challenge, which could cost Ministers the next Election.
While doubtful that George Osborne could change course and introduce tax changes that would penalise cash hoarding, Spencer said: 'If the business community does not grasp this opportunity, it will not be the next Budget that it has to worry about but the next Labour Budget.'