British prime minister David Cameron today urged companies to use more of their profits to expand and promised to do more to get bank lending flowing to smaller firms as huge cuts in public spending begin to kick in.
Mr Cameron, speaking to business leaders in London, was seeking to switch the focus of debate on the economy to growth after unveiling cuts last week which some analysts say could cost almost a million public and private sector jobs by 2014/15.
"British businesses are rebuilding their balance sheets because they have relatively strong profit and loss accounts," Mr Cameron said.
"If we are to get back to strong growth, these profits need to turn into productive investment."
The Conservative-Liberal Democrat government, in power since May, unveiled the details last week of departmental spending cuts totalling £81 billion over four years – as part of its effort to all but eliminate a record budget deficit.
Opposition Labour politicians and some economists have warned that such severe cuts could drive Britain back into recession, given broad signs of an economic slowdown after a strong rebound at the start of this year.
Economic growth figures for the third quarter, to be released tomorrow, are expected to show a marked slowdown from the 1.2 per cent growth seen in the previous three months.
Mr Cameron said the government's austerity plans - which have helped to drive long-term borrowing costs down to record lows - should give businesses the security they needed to invest.
The coalition wants to unlock £200 billion pounds of public and private sector investment in infrastructure to boost growth.
It has already ear-marked £40 billion of government money for transport, energy and communications projects and is hoping the private sector will quadruple that.
"We've got to back the big businesses of tomorrow, not just the big businesses of today," Mr Cameron told the Confederation of British Industry's annual conference.
"That means opening up access to finance, creating an attractive environment for venture capital funding, getting banks lending to small businesses again and insisting a far greater proportion of government procurement budgets are spent on small and medium sized firms."
Reuters