Standard & Poor’s continued rating of the British economy as AAA is quite possibly the last piece of economic good news we will receive this side of the new financial year. The importance of this assessment cannot be underestimated and signals that the other major credit rating agencies will rate our economy similarly. This does not mean that we can rest on our laurels; we have a very difficult time ahead and too many external factors dragging on our economy, to give us any certainty that our actions alone will be enough to avoid further recession.
The infantry in Britain’s battle for economic revival is the small business community and ultimately the government is relying on them to ignite national economic growth. But in the light of continued failure by the banks to revitalise credit lines to small businesses, Flatline George has announced “plans” for government “credit easing”. This is all very well, except for the fact that there is no plan – it is simply the announcement of the intention to develop a plan. So as businesses face the bleakest Christmas in more than a generation, the implementation of measures to support them will not happen until comfortably into the New Year. What is also worrying about this is that the credit easing system, once developed, may also be used to support large businesses in the event of a further credit crunch. Let there be no mistake, big business is surviving not thriving and it is they that the government will ultimately prioritise when times become harder. So where will small businesses stand?
Nevertheless, there has been cautious support for the Chancellor’s announcement and rightly so. On the one hand, almost any measure that will support our small businesses in the current economic climate needs to be considered favourably. On the other hand, look carefully for smoke and mirrors because ill conceived spin often has a nasty sting in its
tail. And there is scope for a sting from this proposal – the government would have to borrow to fund it; the debt would not be classed as a debt but as liquid assets; and, whilst in the short term credit easing measures could even improve public finances a little, in the longer term we will liable for any losses incurred through the scheme.
So whilst we enjoy our continued triple-A rating, both keeping it and enjoying the benefits of it are far from guaranteed and our frontline is still woefully ill-equipped. And in the meantime, we must consider carefully the details of the Chancellor’s credit easing plans as they become available.