The Bank of England says that the quantitative easing programme that was rolled out after the credit crunch boosted the UK’s economy by 2%, adding weight to demands for the Bank to print more money.
During the QE programme between March 2009 and January the following year, the BoE bought assets valued at £200 billion, to help bolster the economy. This helped to increase GDP by between 1.5% and 2%.
Fears that the UK could slip back into recession have increased calls for a further programme of QE.
Interest rates cannot be lowered any further, so speculation is rising that the Bank will once again print more money. The downside of doing this is that inflation could rise, heaping more misery on already cash-strapped families.
The Bank says the first round of QE measures boosted growth, but points out that there may be different effects next time.
Adam Posen, a member of the BoE Monetary Policy Committee, has been voting for more QE, saying it is needed if we are going to avoid long-lasting damage to the economy.
Meanwhile, the FSB says the government is out of touch with reality when it comes to growing the economy.
The Federation says that very few of the coalition’s policies tackle the problems facing small firms. Reducing red tape and providing initiatives to encourage small businesses to take on staff are welcome, but the government still needs to do more.
Small businesses are facing some of the same challenges that they faced during the credit crisis. Uncertainty surrounding contracts, poor cash flow, the inability to access finance and the cost of credit are preventing them from hiring.
The FSB is calling on the government to extend both the work trials scheme and the NIC holiday for micro-businesses. It also suggests reducing VAT in the construction and tourism sectors to 5% on a temporary basis.
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Image: Belt. by Ollie Crafoord
