Currency watch: Britain reliant on business

The Bank of England’s Monetary Policy Committee’s interest rate decision took centre stage at the end of last week after they decided to hold rates at 0.5% and not inject extra quantitative easing just yet.

It will surely only take a bit more negative news to push most people to vote towards further quantitative easing being put into place, although inflation is still worryingly high.

With all these worries over the state of the UK recovery there has been talk of delaying the government’s planned spending cuts, but whether near or far they will still play on confidence.

Therefore, we look to the corporate sector to pull us out of trouble, and things do not seem very promising there either, what with high inflation reducing consumers’ incomes and the long-awaited trade boost failing to arrive.

Chancellor George Osborne has, however, given the go ahead to the Bank of England to stuff more money into the economy; this stems from worries the spending cuts might have a negative effect. He also insisted on Friday that, unlike April, the cuts would be released at a staggered rate which might limit the damage.
 
This time next week we will know the extent of the cuts that the government is looking to force upon the country in a bid to tackle our hoofing great big deficit.

At the time of writing, the government is keeping surprisingly schtum about the cuts, but it is obvious that all departments are going to feel the pinch somewhere along the line.

A fair few quangos have been cut over the past 24 hours, with my particular favourite being the “Government Hospitality Advisory Committee on the Purchase of Wines” – proof that the UK’s Champagne lifestyle, brown ale income conundrum is only just starting.

Jeremy Cook, chief economist at World First, 15.10.2010