Moulton warns regions will struggle to compete with South East
THE venture capitalist who once tried to buy-out the ailing MG Rover has warned that UK regions will struggle to narrow the gap in economic growth with the South East.
Jon Moulton also predicted as many as 80,000 companies were in real danger of going out of business.
Speaking at the Leeds University Business School’s “Corporate Wisdom” event , Mr Moulton said that the growth of the public sector nationally risked stifling growth and this was equally true for regions outside the capital. Changes that might attract new businesses, such as improved infrastructure, could help narrow the gap but there was no instant solution.
Mr Moulton, chairman of Better Capital and founder of Alchemy Partners said: “The regions outside the South East are growing slower than the South East, in some cases remarkably slower.
“All the studies show that wealth attracts wealth and it keeps pulling together. Perhaps the best thing we could do is to grow the South East faster, accepting that Leeds will grow slower but at least it will grow with it.”
He added: “Don’t apply for stacks of government money. That will make it worse.”
In his speech, entitled “Our Children’s Debts”, Mr Moulton highlighted the grave risks that face the British economy unless tough action is taken to tackle its underlying problems and argued that key economic indicators were worse now than at the time of the IMF crisis.
He pointed to the remarkably low company failure rate in the recent recession compared to previous downturns and suggested this was artificially low, in part because low interest rates and also because of HMRC defering on collection of business taxes worth £42bn. Mr Moulton estimated this could amount to 80,000 companies remaining in business that would otherwise have collapsed.
“We will see a lot of failures in the next year or so, that appears certain,” he said.
Mr Moulton said it would be the next generation who would pay the price for a failure to take the difficult decisions that would rebalance the British economy.
“This is something we have got to get rid of, the concept that defering is a solution – it’s not. It makes the problem bigger and more painful when it finally lands,” he said.
Mr Moulton admitted he was “genuinely surprised” by the way the new coalition Government’s approach to the economy but he remained concerned that the “immense tensions” between the two political parties made the partnership’s collapse a very real possibility.
