Treasury chief urges businesses to invest

The chief secretary to the Treasury is urging businesses to invest money that they are sitting on, saying it has the potential to drive economic growth.


Danny Alexander believes UK businesses are holding on to around £500 billion and that economic recovery is being slowed by their lack of investment.


He is now urging business leaders to have more confidence in the economy and invest some of that money, which to date has been a slow process.


Treasury officials are said to be “puzzled” by the slow uptake of business investment, which dropped by 2.7% in the last quarter, despite cash reserves rising by £14 billion.


Reasons to be cheerful


“We’ve done the emergency repairs; the engine has had a full service and is getting going again,” Mr. Alexander told the CBI’s Growing Business awards.


“But it won’t get into top gear until British business starts investing some of the half trillion pounds of cash it has built up.”


One reason for the lack of investment could be that companies want to have secured finances should something go wrong.


Should they pile money into investment programmes that do not go smoothly, business restructuring measures and company voluntary arrangements could be just around the corner.


However, increased investment would give the economy more balance. Although there is enough uncertainty over potential demands to slow progress.


Business leaders believe that investment will pick up when the recovery gathers pace and confidence in the economy returns.


This will be a slow process and companies are not prepared to take additional risks yet, due to the potential shortcomings of investing too early.


The Confederation of British Industry expects investment in businesses to rise by 7.3% in 2014, after it has fallen by 2.8% this year.


Money is certainly available for many businesses – both large and small – but market uncertainty is delaying widespread investment.


By Phil Smith


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