Although we try to be internationally minded, the authors of this blog can be forgiven for basking for a little while longer in the reflected glory of a great weekend for British sport. First, the British Lions hammered the feared Australians to win their rugby tour test series 2-1, somewhat contrary to expectations. Then Britain broke a 77-year home-ground losing streak when Andy Murray became the first Briton since Fred Perry to win the Men’s Singles at Wimbledon. Even those of us who are usually bored by tennis were thrilled to see it.
As we have observed before, there is a define correlation between sporting success and confidence, and between confidence and business success.
Confidence is coming back, at least in the UK. Better still, it is not the arrogance that expects, and relies on, another boom – and ignores the consequent bust – but a more realistic confidence in slow, steady recovery, avoiding both boom and bust. There are still some very dangerous unexploded mines out there in the global economy, especially in Europe and the United States, but the UK is better prepared than most for them going off.
Where the talk, not so long ago, was of a possible ‘triple dip recession,’ it turns out that there was never even a ‘double dip recession’ in Britain. A revision of the official statistics confirms what many small businesses suspected: the original post-2008 recession was worse than was said at the time, but once we were clear of it, we stayed clear.
Britain’s Coalition Government might see that as vindication of its policy of ‘austerity,’ but ‘austerity’ has really not been that austere and the new Government’s greatest contribution is simply not making things worse. Still, they do deserve credit for that much. It is better than the alternative, which we had before.
It is therefore disappointing that the Bank of England undermined the mood of confidence by announcing the continuation of its low interest rate policy, with the implication that it will continue to rely instead on ‘quantitative easing’ – printing money to the rest of us. This is the inflationary option rather than the growth option. Although self-appointed small business ‘leaders’ are always calling for lower interest rates, official base rates have relatively little to do with the much, much higher rates currently being paid by business, and it is more important to send the right signals to maintain confidence. A token base rate rise would have been a helpful sign of determination.
In rugby and tennis alike, how one responds to the first touch of the ball is of great psychological importance, often setting the tone for the rest of the match, and the new Governor of the Bank of England, Mark Carney, has not got off to the firm, decisive start he needed.