Exports 'must be encouraged'

Economic recovery in the medium term should be encouraged through raising exports and increasing investment, according to one economist.

Philip Shaw of Investec argued that stronger exports would "allow the economy to move ahead" and added that this would contribute to reducing the UK's trade deficit.

He claimed that more investment would help raise the "productive potential" of the nation, and suggested the two measures should be combined to ensure financial health in the face of austerity measures and a reduced public sector.

Data from the most recent Markit/Chartered Institute of Purchasing and Supply UK Services Purchasing Managers' Index shows that business activity has risen at its slowest rate since August 2009, following government measures to lower the fiscal deficit.

It suggests that commercial confidence has been undermined, as input prices rose more slowly and charges increased at the fastest rate for more than a year and a half.

Mr Shaw noted that initiatives to expand UK exports, such as foreign secretary William Hague lobbying in Japan, are "very welcome".