The latest news on interest rates will inevitably slow what had been some better signs of progress for our economy since the economic turmoil of the autumn. It felt at one point like we were finally through the eye of the storm but now I am much less certain. There were signs things are looking more positive, but the overall situation remains fragile at best and extremely challenging Interest rate rises will not only hit households but will increase costs to businesses stalling investment and consequently growth.
In some sectors, we have been seeing tentative signs of growth, but our economy remains smaller than it was before the pandemic, and is expected to remain so until at least the middle of next year. Although energy prices (hopefully) have reached their peak, they remain high, leading to a period of economic stagnation. Higher interest rates are replacing the brake that was energy costs. Growth projections are modest at best, borrowing costs are on the rise, and the pressure on disposable income continues to mount. What concerns me most is the continued absence of a clear national plan to invest in our future industries and growth sectors, and it seems this lacklustre performance will continue for the next twelve to eighteen months.
On top of this, the tight labour market poses a significant challenge for businesses in our region. Skill shortages exacerbate these difficulties, making it harder to drive economic performance. Historically, the South West has relied on employment-driven growth, and this constraint has a tangible impact on our future prospects. We struggle to raise productivity so labour shortages will choke-off any growth.
Our business confidence, while showing some improvement, remains the weakest in the UK. Most SMEs still report no progress in sales, cash flow, or investment. The past three years have been riddled with economic shocks – from COVID-19 lockdowns to global supply chain crises, inflation, and Brexit – which have disproportionately impacted our vital retail and hospitality sectors.
Accessing capital for investment is more challenging here than in other regions. That is why I am particularly pleased about the British Business Bank South West Investment Fund, and am committed to promoting it to SMEs across our area. However, achieving long-term prosperity requires sustained investment from both businesses and Government. Better late than never!
The situation remains extremely challenging. Forecasts can change, and we must remain attentive to the underlying challenges. Returning to sustained growth will require concerted efforts and time.
As we navigate these ongoing economic challenges facing the Heart of the South West, I want to stress the importance of adaptability and perseverance. Let us seize growth opportunities, invest in our future industries, and collaborate closely with the Government to support our businesses. Together, we can shape a resilient and thriving business landscape for the South West, fostering long-term prosperity for our region, our businesses and communities
