Thursday 24 September 2009

Green shoots or a false dawn?

Last night Gordon Brown told the BBC that Britain could look forward to "some economic growth" to be announced in the late October pre-budget report. A return to growth by Britain in the third quarter would be ahead of schedule.

However, the Daily Telegraph reported that the Bank of England's Monetary Policy Committee voiced concerns on the same day. MPC member Kate Barber said in a speech that the coming months would be a test of whether the recovery will be maintained or not.

"Although there has been quite a lot of positive data, both for the global economy and for the UK, in recent months, it remains unclear how far this represents a recovery," she said.

The MPC said that even if the economy did start growing again, the sustainability of that growth could be threatened by rising unemployment and weak consumer spending.

Weak bank lending, high levels of debt and damaged bank balance sheets could all send the economy downward again.

I think it sends the message to business owners to tread with caution over the coming months. It will important not to dive into anything with overconfidence only to find it rebounding on us.

Remember - as the banks stock pile cash again - cash flow is king.

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