North-East Shadow Monetary Committee discuss future policies

A partnership between the North East Chamber of Commerce (NECC), Tees Valley-based accountancy firm Waltons Clark Whitehill and The Northern Echo, the North East Shadow MPC looks at the region’s economy and gives experts from a variety of sectors the opportunity to argue their case for a shift, or hold, in the rate.

Heather O’Driscoll, chair of the committee and Managing Partner at Waltons Clark Whitehill, said the lack of change in rates has gone on for too long and called for the Bank of England’s MPC to provide guidance for businesses.

She said: "The rate has been static for too long and some form of action does need to be taken to send a jolt into the economy.

"A decrease to zero is, in my view, better than continuing to stand still.

"Alongside this, we need the Bank of England’s MPC to make a statement of intent for the coming months to give businesses some solid information they can use to plan for the future.

"Many of those businesses which had reserves have now used them up and, while banks might be lending again, they are not willing to take a risk, which seems to be a strategic, rather than manager-level decision.

"The housing market is starting to move again, because mortgages are getting easier to secure. The same needs to happen with business lending."

Ross Smith, Director of Policy at the North East Chamber of Commerce, called for a continued hold in the rate of interest.

He said: "I think it’s still right to hold interest rates at the moment.

"We’ve seen positive growth for Q1, but it is still relatively slow and as it is only slow growth it is important not to be too hasty and damage interest rates.

"We’ve seen steady but relatively slow growth in the region.

"Service and manufacturing orders have increased in recent months, but not to the levels of before the recession. We need to stimulate growth further."

Ajay Jagota, chief executive of South Shields letting firm KIS, concurred on interest rates and voted for a hold, saying: "Whatever the rate of interest is, I believe it is time for long-term stabilisation.

"This will allow George Osborne’s policies to make an impact, instead of regular tinkering."

John Elliott, chairman of Ebac, deviated from the general consensus, avoiding calls for rates to be held or lowered, and voting for an increase.

He said: "I believe the rate of interest should rise to three per cent or five per cent to give a reasonable return to both lenders and borrowers.

"The continuation of the current low rate is unsustainable and action is needed to get things moving again.

"However, this needs to be done in the form of clear Government policy, rather than simply making a change on a whim.”

Kevin Rowan, regional secretary of the Northern TUC, expressed concern at the lack of progression in the economy, and as such voted for a hold.

He said: "I don’t think there should be any change at the minute, I’m afraid.

"We’re not really seeing any movement in the economy at all, its still pretty stagnant."

Mr Rowan also stated his wish to avoid any further quantitative easing, saying: "I think if there’s any more room for investment it should be in transport infrastructure.

"There’s no evidence that QE is making a difference."

David Bowles, non-executive director of NDI Ltd and chairman of Inova Power, agreed on the need for interest rates to be held, while also backing calls to avoid additional QE.

He said: “I don’t think interest rates should change.

"The economy is still flat-lining, so they should stay where they’re at.

"All QE has done is strengthen banks’ balance sheets.

"Business is still suffering from a lack of banks’ lending, so I would say no to any more quantitative easing.”

The concern over economic stagnation was echoed by David Coates, managing director of Newsquest North-East, who also called for rates to be held.

He said: "There’s still no meaningful improvement in the underlying economy.

"If anything local markets slowed in March and April with the awful weather materially affecting sales volumes for many of our customers."

Mr Coates stated his wish for further quantitative easing – the only member to vote for it.

He said: "I would be in favour of more QE.

"Despite prolonged low interest rates, the economy is still not picking up and we need something to get it moving."

Nigel Mills, chairman of North-East Entrepreneur’s Forum cited the struggle of businesses to vote for a hold in rates.

He said: "Turnover is hard to get at the moment, and if you get it, its at cost of margin.

"There have been very big cost increases, such as the cost of materials.

"You need interest rates to stay low and pay debts and stay in business."

Michael O’Connell, owner of EOS Ltd, rounded up votes by adding to the general belief that rates should be held, as well as voting against QE.

He said: "Money is still hard to come by and we need to keep rates as low as possible and generate an increase in the economy."