The head of the Confederation of British Industry (CBI), the leading group of industry managers, said on Friday that the British economy faced a tough 2012 and needed to begin a five-year journey to recovery through rebalancing away from debt-fuelled growth toward export-led growth.
The CBI director general John Cridland predicted that 2012 would be a hard year for the economy, and that Britain needed to steer the economy away from individual and public debt and towards greater exports underpinned by investment in private industry.
Cridland said,"We need to identify how Britain will earn its living and pay its way in the years ahead and that means adjusting to change. The faltering recovery with family and business budgets under pressure and the on-going crisis in the eurozone are stark reminders of the need to rebalance our economy away from household and government debt."
"There are no easy answers when it comes to securing future long-term growth. The hard graft of rebalancing is the only way it can be achieved, so it's time to stop talking about it and get on with it," he added.
Cridland warned that if rebalancing did not take place then Britain's debts would continue to grow and trend growth-rate would remain low. "Only through rebalancing can we return growth to long-term sustainable levels," he said.
Cridland was launching a CBI report "A Vision for Rebalancing the Economy", which advocated a private-sector led recovery to Britain's continuing economic problems, which began with the financial crisis of 2008/2009.
Britain had had a long boom, dating back to 1997, largely fuelled by growing personal debt and latterly by increased public spending. When the financial crisis broke, Britain's indebtedness and its unbalanced economy, which was too reliant on services and the financial sector, suffered.
Growth before the financial crisis had been at or above the long-term trend of 2.2 percent annually, but the CBI forecast that a rebalancing of the economy would take five years and produce growth of 1.6 percent annually.
Increased exports needed to play a leading role, with investment by private business also important.
Cridland said the private sector needed to invest 170 billion pounds (about 263.7 billion U.S. dollars) in upgrades ovrer the coming five years, and he pointed to business opportunities provided by the growing middle classes in emerging economies, and greater demand for domestic services such as education, health and the digital sector.