‘Strangled Parliament could damage business’

HSBC’s chief economist Mark Berrisford-Smith has visited Manchester to deliver an optimistic message to business leaders on the performance of the UK economy.

But he also voiced fears an “indecisive” general election outcome may result in “not a hung parliament, but a strangled parliament” unable to tackle the major issues facing the country, including the deficit.

Uncertainty over the prospect of a referendum on EU membership – promised by David Cameron for 2017 if the Conservatives get in – could also be damaging, said Mr Berrisford-Smith.

At a business lunch hosted by chartered accountant Hurst he said generally the economy was in good shape.

“Unemployment is coming back down to normal levels and consumers are prepared to spend,” he said.

But he went on: “The big problems are the deficit and the balance of payments. These are manageable as long as are in a stable political environment , which is why I think the General Election (in May) is important.

“What might upset the recovery is the uncertainty of what might come after the election. Mr Cameron has said if the Conservatives get in the referendum  will be in 2017. I hope to goodness he does it sooner than that – probably 2016.

“Two-and-a-half years of uncertainty could be very damaging to UK businesses.”

Mr Berrisford-Smith said if current polls are to be believed the outcome of the election would “not be hung parliament, but a strangled parliament” with the two major parties unable to form a majority government by making a deal with the Lib/Dems.

He also called on leaders across the northern cities, including Manchester, to join together for a much larger scale form of devolution which is currently on the table.

“There is a obviously a challenge in that the North-South divide got a lot worse in the 20 years before 2008.

“To some extent is wasn’t a North-South divide, although that’s how it’s portrayed up here. It was actually a London and the rest divide. A bigger gap even opened up between London and the rest of the south.

“Devolution is  about the north, but it’s actually a bit wider than the north as well.
 
“I think the challenge for the North is that devolution is all very well but to really get any momentum, it’s got to be much bigger than that.

“If you think about London – it’s 33 boroughs. I would’ve thought you would need a structure like that from Liverpool to Hull taking responsibility for economic planning and development across the whole regional and take a regional approach to it, so they’re not all going off to inward investors and fighting their own corner and competing with each other because  that’s not going to help.

“I would call it the TPA – the Trans Pennine Authority. You’d need the four big cities (Manchester, Liverpool, Leeds, and Sheffield) and maybe even Preston.

“Then you would have a meaningful unit that could attract investment and can then bargain with the centre. This is often the problem – that there are areas of the country that prove weaker when it comes to getting resources.

“Manchester has done relatively well at it, but other cities have done less well at making a case for resources.”

Mr Berrisford-Smith also said the talked-about HS3 trans-Pennine rail link would also be crucial to this development.