Time to “grin and bear it” says RBS Chief Economist
0In a frank opening to day two of the ACT Annual Conference 2012 in Liverpool, the RBS Group Chief Economist, Andrew McLaughlin, pulled no punches in spelling out his hopes, or lack thereof, for an imminent economic recovery in the UK. Or at least, not one with the sort of growth we became accustomed to before the credit crunch.
Responding to the question of how best to stimulate growth, McLaughlin, who doubles up as the bank’s Group Director of Communications, argued that while the government was doing what it could, “perhaps we are asking ourselves the wrong question.”
“Those yearning for levels of growth that we saw in the early 2000s need to put those thoughts out of their mind”, said McLaughlin. “We have to fix the balance sheet first.”
Part of that process will entail the massive de-leveraging of UK banks and while that is well underway, according to the RBS man, he cautioned that there is currently “no sustainable platform for vigorous growth without taking excessive risks in fiscal policy.”
It is, he said, “time to grin and bear it.”
Talking to Room151, McLaughlin developed his case for the Government’s handling of the crisis: “Given the hand they’ve been dealt, I think they’re taking the steps you would expect them to take. They’re actually following very closely the strategy that was deployed in Sweden when they had their financial crisis in the early 1990s.
“What’s making it harder for the Government is that this crisis is a bit deeper and we’re having it at the same time as lots of other people.”
The Swedes, contends McLaughlin, were able to trade their way out of crisis – and fix their balance sheet – in a world that was, by-and-large, growing. Instead, the UK is attempting the same in “a much more precarious global economy”.
