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A New Year's Resolution for British Business: Start Spending

09/01/2013 13:37 GMT | Updated 11/03/2013 09:12 GMT

With recent reports from the Federation of Small Businesses, the Institute of Directors and others all suggesting that UK business confidence is starting to look up, let's hope that 2013 is the year that corporate optimism finally kick-starts economic growth. It is certainly overdue. Over the past two and a half years, the coalition government's austerity agenda managed to choke off any hope of genuine recovery, strangling demand and pushing us into an unprecedented double-dip recession. Add to this the perennial crisis in the eurozone, and it's clear to see why the recent past has been a period of considerable uncertainty for businesses. It doesn't need to be this way. For a return to solid, sustainable growth, businesses must start spending.

Imagine if the flatlining UK economy could tap into a £750bn stimulus package - more than double the amount already spent by the Bank of England's quantitative easing programme - to invest across the country in the sectors that need it most, getting the stuttering engine of UK plc back up and running, firing on all cylinders. Well, such a stimulus package exists in the form of the biggest cash surplus to have ever accumulated on the balance sheets of Britain's largest companies. The Government must urgently come up with some sensible ideas on how best to unleash this pool of potential investment in the real economy, or the UK will continue to trundle along in the global slow lane.

Whether helping businesses hire new workers, or giving them incentives to invest in plant and machinery, the Government should be bending over backwards to provide projects and guarantees to spend this cash, and yet they do nothing of the sort. The Regional Growth Fund - seemingly the ideal opportunity for partnerships of this kind - has had little effect on either employment or growth, and its £2.6bn funding pot looks pretty meagre when viewed next to the potential for genuine economic stimulus present in the private sector.

The 'hidden stimulus' in the economy isn't just limited to corporate cash reserves. Land is also being hoarded in record amounts. UK house builders are sitting on over 400,000 plots, complete with planning permission. With the construction sector looking fragile and young people finding it harder to buy houses than ever, could there be a better example of a nationwide, shovel-ready project to stimulate growth and create jobs? With the number of houses being built languishing far below the number the UK needs, ministers should engage in some joined-up thinking to bring private capital and public guarantees together.

The Shard in London, which has shot up 2000ft above the Thames over the past three years, was funded by Middle Eastern investors seeking healthy returns on their capital over many years. There is no reason why more corporate cash, pension fund money and institutional investment cannot be channelled into other projects designed to repair our creaking infrastructure, offering investors steady returns in the process. Again, Government strategy is missing, and constructive partnerships go unrealised.

Stirring what economist John Maynard Keynes called the economy's 'animal spirits' - essentially, the level of confidence possessed by investors - is no easy task. But this bungling coalition government have done little to create conditions of domestic policy certainty to provide reassurance to get business spending. From the West Coast Mainline fiasco to constant dithering over energy, airports and long-term strategy in general, ministers are sending all the wrong signals to business. If this continues, the task of persuading them to get their cash out of the banks and into the real economy will be impossible. The New Year is a time for new resolutions. For British business it is simple: start spending, start building and start hiring before it's too late.