May 22 - The IMF has called on Britain's government to do more to speed up slow economic recovery, hinting that the country might be able to afford to borrow more to fund investment. Joanna Partridge reports.
British retail sales dropped at their sharpest pace in a year last month - a reminder of the weakness in the country's economy. Food sales were particularly poor - down more than 4 percent from March, and the worst showing in almost two years. In its annual review of the UK economy, the International Monetary Fund says Britain should be doing more to speed up the slow recovery, possibly by borrowing to fund investment. David Lipton is the First Deputy Managing Director of the IMF. SOUNDBITE: David Lipton, First Deputy Managing Director, International Monetary Fund, saying (English): "Without investment in infrastructure and skills, to boost the long-run productive and export potential of the economy, private sector expectations of future incomes will remain suppressed. This in turn will weigh upon consumption and investment demand. This is where both fiscal and structural policies can play an important role." The report is unlikely to bring about any significant change in the UK government's austerity drive, especially when it doesn't call directly for spending cuts to be deferred. But it may increase the pressure on Prime Minister David Cameron He's been talking up recent signs of recovery. But Michael Hewson from CMC Markets says he doesn't see much to shout about. SOUNDBITE (ENGLISH): MARKET ANALYST AT CMC MARKETS, MICHAEL HEWSON, SAYING: "I think it's slowly showing flickers of life. I think it's very important not to overplay the fact that it's recovering, it's recovering very slowly. There's still an awful lot of deleveraging to take place." Bailed-out lenders RBS and Lloyds came in for comment - the IMF wants a clear strategy for returning them to private ownership. A new scheme to boost the housing sector was also a cause for concern, although Britain's "flexibility" over its push to fix one of the biggest budget deficits in the EU was welcomed. The government will certainly take note of the annual review but it seems Finance Minister George Osborne may cherry pick from the report. He's said in the past he won't take on board any recommendations he doesn't agree with.