The Confederation of British Industry, an influential business group, has called for a "Plan A Plus" to kick start the UK economy as the eurozone sovereign debt crisis and weak domestic demand weigh on the country's growth prospects.
The CBI has revised its growth forecast for 2011 down from 1.3% to 0.9%, and its 2012 projections down from 2.2% to 1.2%. Unemployment will continue to grow, peaking at 2.75m in the fourth quarter of 2012.
With signals out of Europe increasingly pointing towards a recession in the eurozone, the government needs to stick to the austerity measures outlined in its "Plan A" in order to retain the country's AAA credit rating and prevent it from following other highly indebted countries down the route of unsustainable debt loads.
However, the country should also look to unlock private sector investment through a package of targeted measures, the CBI said. The group said that rebates on the carbon floor price would help the country retain energy-intensive industries; £1,500 credits for taking on jobless young people would assist in tackling youth unemployment; and underwriting mortgage indemnity guarantees would stimulate the housing market, the group said.
Access to finance for small and medium-sized enterprises should be prioritised, and the development of a mid-cap bond market should be part of a package of "credit easing" that is due with the chancellor's autumn statement, and research and development and infrastructure need targeted assistance, according to the CBI. The group has identified 26 road projects that need attention.
Initiatives to improve the productivity of the rural economy, as well as pushing young people towards science, mathematics and business and assisting the logistics sector are also included in the CBI's "Plan A Plus".
“The Government must stick to its plans to bring down the deficit to maintain confidence in the UK’s public finances and keep the cost of borrowing down, but now is the time to revitalise its growth strategy and create a 'Plan A plus'," CBI director general John Cridland said. “In uncertain economic times, confidence falters, investment grinds to a halt and job opportunities fade. This package of measures taken together could make a real difference to the economy, creating jobs and boosting growth in the years ahead.”