Call for Government to use low interest rates to drive infrastructure

Fund manager Schroders has called for the UK Government to use extremely low interest rates to undertake “huge multi-decade infrastructure investment projects” which it says the UK needs to unlock its future growth potential.

The call came from Schroders European economist Azad Zangana after initial figures showed that the UK had narrowly avoided a triple dip recession, with a 0.3% growth figure for the first quarter of 2013. Zangana noted that the news came after the IMF recently told chancellor George Osborne that a change of course in his austerity plans was needed. Zangana commented: “The UK economy is facing severe headwinds with the household sector, banking sector and government all trying to deleverage at the same time. Meanwhile, the non- banking corporate sector – the only healthy part of the economy – has been shaken by the crisis in the Eurozone. As a result, the economy is barely generating any growth at all.”

Zanagana added that the UK economy should pick up in the second half of 2013 but that the key threat in near term is the faltering Eurozone economy. He commented: “Political instability coupled with severe austerity is damaging confidence in the Eurozone and having a knock on impact on UK exporters. We expect the Bank of England to respond with another £25-50 billion of quantitative easing in May, which will complement the expansion of the funding for lending scheme.”