This is turning into a bad week for Gordon Brown. Despite his PR-friendly ‘employment summit’ in Whitehall, the Prime Minister is being battered from all sides by worsening economic data, gloomy predictions and, worst of all, a Tory revival in the polls. The Government is apparently putting the final touches to a £20bn scheme that will guarantee loans for small and medium-sized businesses – but it might need more than that to revive its fortunes...
Let’s start with the gloomy economic stuff. Chief harbinger of doom this morning was the British Chamber of Commerce, whose latest member survey apparently yielded some ‘truly awful’ results. The report suggested plunging domestic demand, a fall in exports and a sharp drop in business confidence during the last quarter of 2008. ‘It is clear that the UK economy is facing a very serious recession, and the downturn is deepening at an alarming pace,’ moaned the cheerless BCC, which reckons it’s never seen the UK in such a dire state during its 20-year history.
Today’s official figures on the UK trade deficit (the gap between imports and exports) didn’t help. Although it was hoped that a weaker pound might make UK goods more attractive, exports fell by nearly 6% as international demand plummeted. Imports also fell, but only by about 2%, thus widening the trade deficit from £3.9bn to £4.5bn. Meanwhile on the home front, job losses keep mounting as more and more business go to the wall, often because they can’t get access to credit – hence why many of those at the employment summit thought this should be the focus of the Government’s attention.
Labour’s response will apparently be a £20bn loan guarantee scheme for SMEs (an extension of the current set-up), where the taxpayer will underwrite some of the risk of the borrower defaulting (and, since 28% of these loans do default in the current scheme, suck up some big losses). This sounds suspiciously like a smaller version of an idea floated by the Conservatives two months ago – a potential moral victory for the Tories, who according to today’s Times have already recovered a ten-point lead in the polls as the ‘Brown bounce’ fades into distant memory.
Worse still for Brown, the Times poll suggests voters aren’t yet that worried about the recession from a personal point of view – perhaps because for many, falling inflation, fuel prices and mortgage bills have left them with a bit more money in their pockets. As redundancies rise, his popularity could well go in the other direction...
In today's bulletin:
Tesco finds itself in the slow lane
Brown mulls loan guarantees as downturn gets scary
Eurostar's sterling display as sales hit record level
Crispy crisis as Findus pancake
Google: search and destroy?