Economic statistic of the week

From Sean O’Gray in The Independent:

December 2010 is the first month in – probably – history where the UK’s manufacturing sector had more money on deposit than it borrowed from the banks. Or, to put it another way, industry is lending money to the banks, rather than the other way around. Bizarre.

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  • toryboysnevergrowup 4th Feb '11 - 9:45am

    And why don’t you think that the corporate sector wants to invest – couldn’t be that they don’t believe what the Government says about future economic growth???

  • I think a major worry is that manufacturers may look abroad to joint local deals in the likes of India and China and that would eventually see not just a flight of capital from the UK but also following behind a loss of jobs as companies become used to operating in China and India.

    With interest rates as they are, manufacturers can’t invest here so from their point of view what do they do with this capital which will be eroded by increasing inflation if not put to use.

    This is why a real and strong growth policy is required and the timing of it is becoming more critical.

  • @EcoJon

    Actually, most of the offshoring that was going to be done has already been done.

    What is happening now to some extent is “onshoring”, where some companies are actually bringing production back here. I was interested by an article (“UK Manufacturing Reborn”) in the fashion industry magazine, Drapers, which says that even clothing production is coming back to the UK because of rising costs in China, increasing transport costs, quicker product lead times from manufacturing here and the prestige of the Made in the UK label in terms of quality. Obviously it is returning from a low base, but companies are now recruiting and expanding their facilities.

    Most companies basically project the future based on recent experience. The longer that recent experience carries on being positive, with rising output, the more they are likely to have the confidence to invest.

    Real and strong growth policy is needed, but it will not be put in place if the public finances are out of control.

  • john stevens 5th Feb '11 - 1:04pm

    Now would be a good time to switch from allowing interest payments to be deductable from pre-tax profits to dividend payments being so: a major step towards deleveraging our economy and encouraging venture capital.

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