UK firms urged to spend cash to ensure ‘durable’ economic recovery

News Article - 26 April 2011
Category: Business

A recent report indicates UK firms should spend more of their cash reserve to ensure a 'durable' economic recovery.

The research group, Ernst & Young Item Club, called upon businesses to loosen their purse strings to ease the financial burden on consumers. The Item Club has forecast the UK economy to grow by 1.8 per cent in 2011, with increased rates of 2.3 and 2.7 per cent in 2012 and 2013.

But economic experts are urging large corporations to make calculated investments with their spare cash in order to fuel expansion.

Peter Spencer, chief economic adviser to the Item Club, said: "Large companies are in a position to actually pull us out of this. If you're an overseas-facing company with good investment opportunities, you should be looking to invest that [spare cash] properly."

The Item Club's spring forecast suggested a "major revival" in in business spending was just around the corner.

"The purse strings are starting to loosen, with some spending on vehicles and other easy asset purchases beginning to take place," said Mr Spencer.

Despite this increased confidence in business investment two other recent surveys suggested that UK firms have actually continued to cut back their spending in some areas of their organisations.

Research from the Institute of Practitioners in Advertising (IPA) showed a quarter of 300 firms surveyed said they were forced to continue spending cutbacks compared to 20 per cent who reported an increase.

Meanwhile the Federation of Small Businesses (FSB) has reiterated that many of its members have continued to report job cuts throughout Q1 2011.

There is light at the end of the tunnel however, as the Office for National Statistics (ONS) revealed recently that unemployment figures fell in the UK at the end of February for the first time since last autumn.

It is certainly a step in the right direction and the private sector are being encouraged to do all they can to create more full-time jobs and take the strain off squeezed households.

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