Budget 2013: Infrastructure projects can secure growth

 

As part of a series of blogs previewing Budget 2013, corporate finance director Stephen Gregson, offers his thoughts on what can be done to kickstart growth.

 

The budget comes at a period of continued uncertainty for the UK as a whole. Standards of living continue to be at best stationery, if not dropping, due to static wages and rising food and energy prices. This runs the very real risk of making the government’s mantra that ‘we’re all in it together’ sound hollow, even disingenuous.

 

As a worst case scenario, there could be a risk of disengagement from mainstream politics, leading to perhaps ‘direct action’ on the streets – and that could hit the economy hard.

 

Another political pitfall for George Osborne is the loss of the UK’s AAA credit rating. Although we shouldn’t overstate the influence of commercial ratings agencies, Mr Osborne arguably faces a credibility issue because he came into office predicting dire consequences if the UK lost its investment grade status.

 

It seems clear that any growth will have to come from investment, which translates into new infrastructure spending. The funding of mammoth schemes may be difficult politically, although infrastructure projects represent an important commitment to the country’s economic future and do generate prosperity.

 

However, perhaps much more could be achieved, and more quickly, if instead Government looked at smaller scale infrastructure works, such as the repair of roads and rail networks.

 

There may also be announcements regarding the tax system. These may relate to simplification, but the greatest emphasis may well be placed on ‘clamping down’ on the perceived tax avoidance of international businesses’ UK operations.