IMF finds humble pie not to its taste as UK adopts the recovery position

IMF finds humble pie not to its taste as UK adopts the recovery position

Yet in the latest World Economic Outlook the IMF warns that, despite this higher growth, output will remain below potential “for many years”. It also continues to insist that “public investment can be brought forward” without risk to medium-term fiscal consolidation.

This marks a slight change in language from six months ago, when the UK Government was urged “to consider” such a rescheduling. Even so, Prof Blanchard is clearly not yet prepared to concede he was wrong.

This is at best petulant because, even at the time he made his remarks, let alone now, it was obvious he didn’t properly understand what was going on in the UK economy.

First, and foremost, the austerity applied was not nearly as harsh as he seemed to imagine, and certainly hardly anything at all compared to the fiscal consolidation the IMF was party to in the eurozone periphery.

Secondly, the UK was already engaging in a mild form of fiscal stimulus — albeit through the back door and deploying government support for the housing market, which is not without risks.

And third, and most surprising of all, the UK recovery was already by then beginning to pick up pace, making the IMF’s decision to slash its UK forecast look completely out of date.

Furthermore, Britain’s improving prospects were set against a sharp downgrade of global growth — projected to be 2.9pc this year and 3.6pc in 2014, compared to predictions of 3.2pc and 3.8pc back in July — due to a rapid slowdown in emerging market economies,

Still, let’s move on. The IMF’s greatest strictures this time around are reserved for the US. Regardless of the government shutdown and the imminent risk of default, the sequester is already leading to a fiscal consolidation in the US which the IMF judges to be “too large and too arbitrary”.

Is the IMF about to be proved as wrong about the US as it was about the UK? To a large extent, this obviously depends on how the present political stand-off on the debt ceiling plays out. On this at least, it is hard to disagree with Prof Blanchard’s prognosis that if the US starts defaulting “it could well be that what is now a recovery will turn into a recession or even worse”.

Quite so.

Export challenge needs help, not hindrance

Even allowing for the most optimistic of forecasts, George Osborne’s target of getting 100,000 more companies exporting and doubling exports to £1 trillion by 2020 looks ambitious.

That’s not to say the Chancellor is wrong to have set the bar high. Far better to challenge firms to expand into new markets, and provide government support to make this happen, than meekly accept our best days as a trading nation are behind us.

HSBC’s trade confidence index, published yesterday, made encouraging reading; 61pc of British companies think export volumes will increase over the next six months.

This is in line with official data showing that exports grew by nearly 4pc in the second quarter of the year and is also in line with a survey by the manufacturers’ organisation, EEF, which found that export orders reached a two-year high in the third quarter of the year.

But we should not forget that in order to achieve the Chancellor’s target exports will have to grow by 9.2pc every year between now and 2020.

In its exports manifesto, HSBC yesterday lifted a raft of measures the government could introduce to help exporters, including export tax credits aimed specifically at small and medium-sized firms and a new mechanism allowing SMEs to make joint bids for contracts.

But, quite rightly, the bank — the world’s largest for international trade — also made an explicit link between an improved visa system and export success.

It cited the case of the award-winning Brompton Bicycle: 80pc of its revenue comes from sales abroad, but managing director Will Butler-Adams would be forgiven for thinking it was in spite of, rather than because of, official help. Most recently, his Colombian distributor was not able to get to a conference in the UK because of visa delays.

Another company had to cancel a business delegation from Russia for the same reason; a native Chinese speaker employed on a student visa was almost sent home because of difficulties in securing a longer-term permit.

This paper has campaigned vigorously for a relaxation of the visa system for Chinese visitors; it has often felt like the Government has been dragged kicking and screaming into, first, acknowledging the problem and, secondly, doing anything about it.

But changes announced last month, allowing Chinese visitors to the UK to apply for a tourist visa using the same application system used by the Schengen group of European countries, such as France, Germany and Italy, are as welcome as they are overdue.

Encouraging more tourists to come and spend their money in Britain and more British firms to sell their products abroad are two sides of the same coin.

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