No Time for Complacency on UK Economy

Since 2010, the UK economy is slowly becoming more resilient. GDP growth has remained strong, with the UK achieving the highest level in the G7 at 2.8% in 2014. Unemployment has continued on its downward trajectory, with the number of unemployment claimants falling by just over 17% in the last year. The claimant rate fell faster in the North East, Yorkshire and the Humber, the East Midlands and the West Midlands than in London, according to figures published by the House of Commons Library. There is also strong evidence of some regions outperforming London in economic growth. For example, the Office for National Statistics (ONS) suggests that gross value added in the West Midlands for 2012-13 outpaced London, increasing by 2.8% compared to London’s 2.6%.

The Government has also achieved success in rebalancing the economy away from public sector spending. UK public spending as a proportion of GDP is estimated to have fallen around four percentage points since its peak in 2011, dropping from 45.3% to 41.4% in 2015. As a consequence, significant progress has been made in reducing the UK’s budget deficit – which stood at a peacetime record of 10.2% of GDP in 2010/11. The budget deficit stands at 3.7% for the year 2014/15 and is anticipated to move into surplus by 2019/20.

The UK’s performance on increasing business investment in the economy has also been positive, growing at an average rate of 5.2% a year for the last five years. More recently, business investment has continued to show strong growth, increasing by 5% when comparing Q2 2015 to Q2 2014. This compares favourably to the growth of 3.7% in retail sales – a good indicator of consumer spending – suggesting a move away from consumer spending-led growth towards more sustainable investment growth.

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Daniel Mahoney, Tim Knox - Friday, 6th November, 2015