07/07/10

By Shraga Zaltzman, Managing Director of TrainE-TraidE.

During any period of economic difficulty it is all too easy to focus on the negatives - the difficult job market and the lack of new opportunities. It was therefore encouraging to see the commitment shown by the Secretary of State for Business, Vince Cable, to force banks to lend to small and medium sized businesses. Reviving a lending reform set up by the former Government, coupled with a reduction in public sector spending may be the last chance at saving our economy.

The first and most important component we need to address is ownership. The private sector needs to take back control of the economy. This will be done by reducing government involvement, thereby reinstating free market principles. However, we need to recognise that, due to the dire state of our economy this cannot be done in one fell swoop, but rather needs a measured approach that will take a number of years.

For this reason, the stimulation of the economy needs to start with the Government forcing banks to lend, with the view to handing over to the private sector as soon as possible. According to a new report this week from Ernst and Young, the economic recovery will be driven by small to medium sized enterprises (SME’s), claiming that “smaller enterprises are crucial to the creation of jobs”. That said, these SME's need capital to grow their businesses and this must start with the banks’ lending money and reduction of corporate taxation.

It might be appropriate at this time for the government to consider employing the policies of the US Reaganomics of the 1980's - Reducing government spending, revisiting taxation on business and reducing government involvement in our economy. This will no doubt have to be done in conjunction with monitoring the money supply, primarily through interest rates to ensure that inflation is kept at a reasonable level.

Change and uncertainty can also create opportunity. I have no doubt that if we do this right and take it seriously the economy will grow, more jobs will be created, compensating for the imminent job losses in the public sector, and hopefully the UK will once again return to being the economic superpower it once was.

In the words of an old time great “A little less conversation a little more action please”.