Businesses urged to invest to drive recovery

Forecasts are mixed as to whether the UK economy will show growth in Q1

The UK economy will struggle to get out of the doldrums until major corporations begin to invest cash again, an economic forecasting group has claimed.

The Ernst & Young Item Club was not as positive about UK economic growth over the next year as yesterday’s IMF forecasts, forecasting just 0.4% growth in 2012.

Although it was noted consumer spending will slow, the biggest issues it sees is with corporate spending, as non-financial firms have accumulated £754 billion in cash but seem less willingly to spend.

Business investment was expected to rise just 1.3% in 2012, a similar pace to 2011.

Peter Spence, the Item Club's chief economic adviser, said of the news, “It is an inescapable arithmetic fact that the economy will not begin to prosper and the government deficit will not come back under control until the captains of industry decide to put back into the economy what they take out."

"It is now up to corporates to play their part in the UK's recovery,” he concluded.