COULD inflation be making a comeback? For 10 years now, economists everywhere have been celebrating the death of inflation.
Yesterday’s gloomy prediction from the Bank of England that the UK’s consumer prices index would rise above 4% later this year must be causing the same economists to reconsider their optimism.
Of course, if oil prices stop rising, then inflation should fall sharply next year, once the effects of the latest rises in a barrel of crude have worked their way out of the system.
There is, however, no guarantee that oil prices won’t continue to rise.
In the meantime, many ordinary householders up and down the country are looking at their outgoings and wondering why the official prediction is as low as 4%. After all, water and gas bills, petrol, bread and rice are all rising sharply, seemingly by much more than single-digit inflation. Something, somewhere, must be falling in price to keep the overall figure down as low as it is. But what could it be?
More important for our economic well-being is what happens to employment levels over the long term. At the moment, employment levels in the UK remain at record levels. While that situation lasts, things shouldn’t get too bleak.
Yet, every time an economic forecast is published, the predictions get gloomier. At the end of last week, the National Institute for Economic and Social Research predicted growth would dwindle to a barely noticeable 0.8% a year. At the start of this week, the Confederation of British Industry’s prediction for growth was only marginally better and significantly below the latest forecasts by both the Bank of England the Treasury.
While nobody has yet stuck their neck out and predicted that the UK will fall into recession, the day when that might happen seems to be getting nearer.
Hopefully, the economists are right and the UK’s economic performance is now near its lowest ebb in the current cycle. If that does indeed happen, and the UK’s 16-year run of unbroken growth continues, it will prove that the economy has become remarkably resilient.
THE Northwest Development Agency is inviting venture fund managers to look after the region’s next round of European Union-funded investment support for small and medium sized businesses.
The NWDA is looking for a single, region-wide fund manager to take on the task of finding suitable investee companies for the cash. In the past, Merseyside had its own dedicated fund, with its own fund management firm.
The NWDA could be right to finish with Merseyside Special Investment Fund, which has been doing the job for the past 12 years, on the grounds that a regional scheme might be more efficient to administer. But I would question if anybody in government has first stopped to consider whether regional venture funds are worth the taxpayer’s money? After all, MSIF’s equity funds have run up big losses, and surely there is a strong correlation between a fund’s financial performance and its wider impact on job creation and improved business formation and growth rates?
It had been hoped that MSIF would make sufficient returns from its investments to allow it to continue in the future, without public money.
This, it appears, is not going to happen.
It is a pity that local control of this money has been lost to Liverpool, a city that has struggled to attract a reasonable share of private equity or venture capital investment in the past.
