Former Chancellor of the Exchequer Norman Lamont who predicted the end of the 1991 recession, has heralded the appearance of green shoots at the BCO conference
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Conservative peer Lamont, who was the first person to use the term ‘green shoots’ to predict economic recovery during the 1991 recession – a prediction now widely held to be prescient – has said he believes the UK is ‘on the road to recovery’.
The former Chancellor of the Exchequer under John Major told the delegates of the BCO conference in Madrid: ‘I do think we will have modest growth this year.’
‘I was asked over dinner last night whether this would be a Japanese situation with a long period of depressed growth,’ Lamont said. ‘I don’t think so. I think we are gradually recovering.’
‘If you look at the employment statistics alone, you would classify this as the fastest recovery. There is a disconnect between the employment statistics and the GDP figures – I believe the GDP figures will turn out to be quite inaccurate.’
Lamont cited ‘bright spots in manufacturing’ and the extensive debt reduction programme as factors aiding the recovery. ‘The debt reduction programme will have to go on whether there is a Labour government or not.’
The banking system is holding everything back
But Lamont also claimed ‘the banking system and bank lending in many parts of the world is the piece that is holding everything back.’
‘Prospects in the Eurozone are pretty dreadful’
Lamont’s predictions for the Eurozone were far more bleak. ‘I do think prospects in the Eurozone are pretty dreadful,’ said Lamont.
‘We’ve had a lot of discussion in the UK about whether we’re going to see a treble dip, although it looks as though the double dip itself may be vanished away by a statistical adjustment. However a single dip that goes on forever is just as bad, and that’s what we’ve had in the Eurozone, with very little sign of it coming to an end.’
‘The Eurozone has got a choice to either integrate or break up. I don’t think we will see an integration – you’re not going to see the creation of a country like the United States, Canada or Australia. I don’t think you’re even going to see a banking union. I think what we will see is more muddling through. They’ve bought a little time in the Eurozone.’
The US has sorted out its banks and the bad debt more quickly than in the UK
Lamont said the Americans were recovering more quickly than Britain, saying: ‘In the United States they’ve sorted out their banks and the bad debt on their balance sheets more quickly than in the United Kingdom. There, credit is beginning to flow again. The depreciation of the dollar has helped the United States. American manufacturing has benefitted, and in each of the last three years has grown, against the trend.
Lamont questioned the government’s extensive use of quantitative easing, raising fears about inflation, ‘not in the short term, but in the long run.’
‘The printing of money is causing so much distortion, it’s going to be a very big job for government to exit from that programme,’ he said.
He added: ‘Quantitative easing carries huge risks and we may live to regret it. Can we handle inflationary growth if it happens?’
Other predictions in Lamont’s speech included a power shift to the Asian countries, and that a revolution of shale gas would reduce the dependency of the United States on the Middle East.
Lamont also called on the audience not to exaggerate lessons learned from the recession: ‘I wouldn’t guarantee that human beings wouldn’t make the same mistakes all over again.
‘We need to be careful in resolving this crisis that we don’t sew the seeds of the next one,’ he said.
BCO conference: Lamont predicts 'modest growth this year.’