EDINBURGH merchant banker Sir Angus Grossart has warned about the economic dangers of promoting growth in debt, fuelled by the assumption of ever-low interest rates.

He has also cautioned that a further two to three years of slow recovery can be expected, and cited a need to move away from a culture of debt and consumer spending to a situation in which saving is rewarded.

Sir Angus strikes his cautious tone in the latest annual report of his Noble Grossart Holdings merchant bank, which has just become available from Companies House.

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Contemplating the current economic situation, in his chairman's statement, Sir Angus says: "Many headwinds have receded, but it remains difficult to find the following winds which would fill our sails. Another two or three years of slow recovery can be expected, so patience and resilience are still required."

He highlights his belief that strong investment into any emerging economic upturn will be critical.

He adds: "We have to move from a culture of debt, and consumer spending, to one where the virtues of saving and primary investment are restored, encouraged and rewarded.

"That view is unfashionable, and embedded interests are again promoting debt growth, fuelled by the assumption of ever-low interest rates. It cannot last."

Noble Grossart Holdings achieved a leap in pre-tax profits to £29.9 million in the year to January 31, from £8.27m in the prior 12 months. The accounts show a rise in the remuneration of the highest-paid director to £580,000, from £562,000.

Noble Grossart Holdings had net assets of £112.6m at January 31, up from £92.9m a year earlier.

Sir Angus says: "The pleasing increase in our profit, to about £30m, is less important than the further material strengthening of our balance sheet which we achieved during the year. Experience has shown that the financial cemetery is populated by those who had too little capital or liquidity, rather than those who might be thought to have too much."

He adds: "Our figures are not the happenstance of a single year. They are the product of our long-term...approach to our business, and our consistent focus on sticking to what we know. We prefer to work in a world of prime movers, rather than financial engineers."