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Carney's forward guidance wins support from N-E businesses
10:56am Tuesday 8th October 2013 in Business
NORTH-EAST business leaders have voted in favour of a more stabilised economy, as the majority of the North East Shadow Monetary Policy Committee (MPC) gave their backing to a hold in interest rates.
After seeing positive signs in the economy, most of the members were happy to support Bank of England Governor, Mark Carney’s, forward guidance policy on a hold in interest rates until unemployment falls to 7 per cent.
A partnership between The Northern Echo, the North East Chamber of Commerce (NECC) and Tees Valley-based accountancy firm Waltons Clark Whitehill, the North East Shadow MPC looks at the region’s economy and gives experts from a variety of sectors the opportunity to argue their case for a shift, or hold, in the rate.
Heather O’Driscoll, chair of the committee and managing partner at Waltons Clark Whitehill, reinforced the need for a hold in interest rates as she believes this would benefit businesses for the future, giving them time to plan ahead and develop. She also stressed the importance of how businesses train and educate apprentices, so that they are prepared for the job ahead.
She said: “I think it is important that there is no change, stability is what we need. Businesses still need to build their confidence so knowing that interest rates are not going to change in the long term is a key factor in helping them plan ahead and look at developing, which is what the economy needs.
“At present, we have vacancies that we can’t fill as we need to find technically competent people with great soft skills, so we need to look at how we train, educate and up-skill people and businesses need support to do this.”
Ross Smith, Director of Policy at the North East Chamber of Commerce, concurred on a hold in interest rates, but feels the North East is suffering as too many public sector jobs are being lost. He also believes that it is vital to prepare jobseekers with the necessary skills needed for when they find employment, echoing Ms ODriscoll’s thoughts.
He said: “We’re starting to see an increase in investment since the recession, so confidence is starting to come back, and this would be nipped in the bud if interest rates were raised.
“I’m seeing members taking on new staff, but we’re still suffering in the North East with so many jobs going in the public sector which is a significant part of the economy, so I would like to see regional issues and markets taken into consideration. We also need to grow the skills of people who are trying to find employment, so when they come to find work they are sufficiently prepared.”
John Elliott, chairman of Ebac, was the only member to vote against a hold in the rate, as he believes that interest rates should increase to between 3 per cent and 5 per cent, arguing that there is a need for change to drive the economy and that savers aren’t benefitting from the hold.
Mr Elliott said: “We haven’t benefitted from low interest rates for the past ten years, and as we are trying the same thing over again, we shouldn’t expect any different results. The hold in the low interest rate is the wrong move from Mark Carney, and he is only going to repeat the same mistakes from his predecessor, and as a result savers are being punished.”
Jane Reynolds, Tees Valley business manager at North East Finance Ltd, called for a period of stability until the economy is in a position to change, and feels that Mark Carney’s forward guidance will come good in the end, but will take time to filter down to benefit everyone.
She said: “From my position as chair of the Tees Valley business, we need a period of stability before we are in a position to make a decision of change. With regards to the forward guidance policy set out by Mark Carney, it will take some time to filter down to everybody to make a positive effect, but the detail has landed.”
Graham Robb, senior partner at Recognition PR, agreed with the general consensus by voting in favour of a hold in the interest rate, on account of business activity being stable for the month of September.
He said: “Business has been good and stable in September, so any change to the interest rate would affect this. There are also signs that employment is starting to get better, which is a positive sign, so I don’t feel there is any need to change this rise in the interest rate.”
Jim Willens, chief executive of Newcastle Building Society, cited an increase in the housing market and the growing confidence in the economy as reason to hold the interest rate.
He said: “I am seeing an increase in housing activity and people are working to take out mortgages. Although this is not substantial, it is steady progress and something that can be built on.
“People are also still saving and there is a growing confidence of progress in the economy, so there is confidence in the forward guidance policies, which fits into the equation of sustained developments.”
Ajay Jagota, chief executive of Tyneside lettings agency KIS, echoed the thoughts of Jim with a hold in the interest rate, as he is also seeing an increase in housing activity, adding that the government’s decision to progress the Help to Buy scheme will help prepare the housing market for January.
He said: “Forward guidance will give stability, as it gives a clear indicator of when interest rates need to be moved to a more sustainable level. Although the economy is moving in the right direction, it is still fragile, but figures are encouraging and we are now beginning to see light at the end of the tunnel.
“The government’s progression of the Help to Buy scheme is a fantastic move and the correct one. The market is most active in January, so introducing it now is ideal and will ensure that it is prepared for then. It is welcome news for the North East as we can do with all the help, which will move the market in the right direction.”
Beth Farhat, regional secretary for the Northern TUC, believes that the hold in interest rates will benefit the hard-working people of the North-East with less disposable income.
She said: “As a region, we have the highest unemployment rate and lowest wages, so it is an opportunity to relieve that pressure on hard-working people until these rise as the economy progresses.
“I welcome the forward guidance as it is taking into consideration people with less disposable income and is not just focussing on economists.”
Catriona Lingwood, chief executive of Constructing Excellence in the North East, rounded up proceedings by voting for a hold in the interest rate as the economy picks up.
She said: “Although there is growth in the sector, it has been slow and the economy needs stability before there is a change in the interest rate.”
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