A senior Minister has said it’s right to celebrate the UK’s latest GDP figures but acknowledged the economic damage done by the pandemic.
Speaking to BusinessLive, Simon Clarke , Chief Secretary to the Treasury, said “everyone should be reassured” by ONS figures that show 7.5% growth in the economy during 2021.
That’s despite key business groups such as the British Chambers of Commerce, the CBI and Federation of Small Businesses pointing to forecasts of sluggish growth in 2023 and 2024, and attributing the figures to a Covid bounceback following a 9.4% fall in 2020.
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When asked if it was disingenuous to hail the growth figures, Mr Clarke said: “I think we’re rightly delighted and everyone today should be reassured by the fact we’ve got these great figures showing the 7.5% recovery last year.
“That does put us right at the top of the G7 in terms of bouncing back from the pandemic.
“Does that mean we’re complacent? No, of course it does not. There’s a lot of damage that’s been done by the pandemic and we’re absolutely conscious of that.
“I agree with business organisations that we want to deal with those supply chain challenges, which are in many cases global but which are a big challenge to the recovery.
“And we also want to bear down on the inflation risk as well, and we’re all very conscious of the cost of living at the moment. That’s why the Government has set out this action we have on energy bills – the £350 designed to cushion the rising gas prices.
“So, we will keep working to make sure we have as lower tax, lower regulation economy as we possibly can – which is what we need to deliver growth.
“But we shouldn’t be downbeat today. This is genuinely a good news story – our economy is larger than it was before we went into the coronavirus pandemic and we should draw great confidence that shows we’ve got the right policies and that the skills of the British people really are now getting us out of the massive hole we went into when we had to close down the economy in 2020.”
Earlier this week, the British Chambers of Commerce said firms were facing a “cost of doing business crisis” and called for action to ease supply chain issues and labour shortages, a moratorium on any policies that increase costs for business and a temporary energy price cap for smaller businesses.
Mr Clarke acknowledged there is a “complex picture” of inflationary pressures – particularly energy prices – and global supply chain problems but stopped short of promising more Government action to address the issues.
He said: “We’ll step in as and when we can, if there is an efficient way in which we can do it that protects the British taxpayer.
“What we can’t do is obviously spend more money if we can’t be confident it’ll lead to the outcomes we want as we spent £400bn responding to the pandemic and we are having to increase taxes to deal with the NHS backlog.
“Nobody wants to be in a position where we end up reducing growth or providing more difficult situations for family finances through tax increases – we have to be conscious of the risk on the other side of the ledger.”
In response to the ONS figures, the Federation of Small Businesses’ national chair Mike Cherry said the data did not show that an economic recovery was under way.
He said: “As last year ended, pent-up demand should’ve had consumers spending right up to Christmas day and beyond. Instead, the economy actually shrank as Omicron anxiety took hold.
“Meanwhile, our small firms that do business internationally were held back by both worldwide supply chain disruption and an ever-growing mountain of new trade paperwork.
“At the same time, close to a billion pounds worth of business support grants for those most in need are still yet to reach them. It’s exasperating to see that, after all this time, some authorities still haven’t got their houses in order.
“Against a backdrop of surging prices and labour shortages, we’re now hurtling towards the unwinding of remaining Covid support measures, a national living wage increase and a regressive hike to national insurance contributions in April.
“Unless policymakers intervene before this April flashpoint to cancel the jobs tax hike and alleviate the mounting wider pressures that small firms face, we risk long-term scarring of the economy and local communities.”