Chief Secretary to the Treasury Danny Alexander will hail British businesses’ ‘hard work, vision and risk taking’ for helping drive the recovery but will call on them to invest more in an evening speech to the Confederation of British Industry (CBI) on Wednesday 23 October.
He will call on business leaders to invest some of their £500 billion cash balances - enough for 50 Olympic games - now to ensure the economy hits ‘top gear’.
Had businesses increased their investment by just 10% in 2012, he will say, then the level of GDP would be £12bn higher - almost a whole percentage point growth in GDP.
The Chief Secretary will explain that the economy is growing and point out that the latest IMF forecast upgraded the UK’s growth by more than any other G7 country - but to ensure benefits are shared with everyone we need the economy to be even more productive.
He will say:
We’ve done the emergency repairs. The engine has had a full service and is getting going again. But it won’t get into top gear until British business starts investing some of the half trillion pounds worth of cash it’s built up in reserve.
He will add that during the financial crisis, the Eurozone crisis and the recovery that has followed businesses have built up their own cash balances and reduced investment in their businesses.
Cash balances in non-financial businesses have risen by £14 billion in the last quarter and £104 billion since pre crisis levels - a 26% increase since the financial crisis. Cash balances now stand at over £500 billion.
At the same time business investment is currently 25% below its pre-recession peak.
Talking to the CBI’s Growing Business awards, which celebrates Britain’s best small and medium size businesses, he will say that now we have “stable finances and growing confidence …there’s never been a better time to invest”.
The Chief Secretary will add that by investing now British business can help secure the recovery:
I know that over the last few years, economic uncertainty made investment harder, but now that we have stable finances; and with confidence growing; and a bright future ahead … I hope you will agree that there’s never been a better time to invest.
We’ve done the emergency repairs, the engine has had a full service and is getting going again. But it won’t get into top gear until British business starts investing some of the half trillion pounds worth of cash it’s built up in reserve.
The OBR recently said that 4.0 percentage points of the 5.7% shortfall in growth since their June 2010 forecast was accounted for by the under-performance of business investment.