Thursday, 7 July 2011

The strange and selfish world of employer lobbying

Interesting piece in the business pages of today's Glasgow Herald, 'Spending Cuts are top threat to SME sector' (pay-walled) which reports a survey of SME's (small and medium sized enterprises) by RSM Tenon. With 18% of respondents identifying it as the most pressing threat to their business, 'spending cuts' replaces 'cash flow' as the top concen of the SME community.

The authors cite the direct loss of public contracts and the detrimental impact on consumer confidence as the primary mechanisms through which spending cuts translate into problems for SMEs. Hardly original observations but accurate nonetheless; the STUC has always argued that the coalition's war on demand would adversely impact all sectors of the economy.

Worth noting in this context that the bodies which purport to represent SMEs remain gung-ho supporters of austerity ( I would give the Federation of Small Business a partial exemption here - for all their faults they do engage on an entirely different level to the other employer representative oragnisations in Scotland) . I spend a reasonable amount of time in the company of these people and I have not once heard any senior employer rep in Scotland acknowledge the impact of cuts on SMEs - or for that matter, larger firms. Not once. Instead I hear only blanket adulation for coalition ministers, support for their risible plan for growth, dutiful repetition of Gideon's 'Uk is the next Greece' line (yep, they're still at it) and all the usual Government/household equivalence fallacy of composition hysterics.

They act as if things are going swimmingly. Not the case. To emphasise the awfulness of current economic performance, let me thrown in a couple of graphs:

From todays' NIESR monthly estimate of GDP growth which forecasts that the UK economy grew by only 0.1% in 2011 Q2. With 0.5% GDP growth in Q1 cancelling out the 0.5% contraction in 2010 Q4, the NIESR is in effect forecasting that the economy has grown by only 0.1% in the 9 months to June - this is an appalling performance by any standards and one that cannot lead to a sustained fall in unemployment.

Second chart, courtesy of Duncan's Economic Blog, shows the weakness of production and manufacturing output in Q2. Together with weak PMI data for services and construction this seems to confirm that the NIESR's forecast is likely to be accurate.


Of course none of this matters to employer bodies whose priorities remain 1) rewriting history around the origins of our current troubles and 2) arranging economic and social affairs in order that the proceeds of growth continue to be funnelled unmolested to their larger members (no pun intended). Having vigorously promoted an extreme deregulatory agenda for the past couple of decades, they react with great indignance to any suggestion that they might, just might, bear some responsibility for the crisis.

No surprise then that policy which undermines the prosperity of small firms is of so little consequence. But maybe policymakers, particularly those who claim to aspire to a fairer distribution of wealth, should stop paying them so much attention?

Stephen Boyd - STUC

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