Richard Willis's Blog

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The UK Economy Rebounds Strongly

Today came the news which some of us expected but many had hoped for. The economy grew in the second quarter of the financial year by a whopping 1%. On an annualised basis this is more than 4% which compares incredibly well to the other major western economies. Of course GDP figures can be revised down as well as up but even some downward revision would still leave a significant boost to the UK economy. I still expect in time the so-called double-dip recession to be revised away and if that does happen economists will look back somewhat differently on the last year’s economic record and the falling unemployment.

Even the normally negative BBC was very upbeat about the growth numbers today. The one group which didn’t seem to share in the delight was the Labour front bench. The bunch of economic illiterates which comprise the Labour Treasury team were slow to comment but when they did could not bring themselves to welcome the news or congratulate the government. Instead they thrashed around to try to put a negative spin on the news and suggest that the 1% growth was somehow a sign of a weak economy. The economy is certainly not out of the woods yet but the green shoots of recovery are sprouting strongly. I just hope that the frost emanating from the Eurozone does not damage the recovery.

If the recovery is maintained strongly it will have a beneficial impact on the levels of tax receipts and therefore the borrowing and debt levels. It would also give the Chancellor a little more flexibility on spending and/or taxation levels. That can only be a good thing for public sector infrastructure investment and the level of tax on hard pressed families. I believe that we have turned the corner and are on the road out of the recession leading to lower deficits and a more sustainable balance between the public and private sectors. This is great news for the country and for the government as “Plan A” is seen by the public to be working. It is bad news for a Labour party which caused much of the deficit and has built their subsequent economic case around criticising everything the government does.

There will undoubtedly be further bumps in the road but today’s news is much better than predicted by most economic pundits and bodes well for the next few quarters. George Osborne will enter the next public spending round and Budget preparation with a spring in his step.

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October 25, 2012 - Posted by | National

7 Comments »

  1. The radio today said half of one percent. Hardly strong or something to make the corks pop on the bubbly. I doubt that it had much resonance in the to be closed Ford Transit Plant in Southampton so you can forget winning either Itchen or Test seats in that town in 2015.

    Now if Osborne REALLY wanted to get a recovery going he should cut VAT back to 17.5% until the end of January 2013 and if he needs to compensate his Budget keep the highest band of income tax at 50% until 6 April 2014.

    I doubt he will do this unfortunately.

    Comment by Steve Foley | October 26, 2012 | Reply

    • Steve – I don’t know what radio you listen to but the quarterly growth figure was 1% not half of one percent – fact!

      Comment by Richard Willis | October 26, 2012 | Reply

      • Radio 4

        Comment by steve foley | October 26, 2012

      • Well I suggest that you misheard!

        Comment by Richard Willis | October 26, 2012

      • Possibly, but i am still underwhelmed. The stats may say something but it is similar to the Unemployment figures which show that this is dropping yet one hears every week of firms closing factories shops etc with hundreds of people losing their jobs which tends to contradict this news.

        IF the growth in the Economy sustains and we start to see what were once referred to as “The Green Shoots” of recovery then fair enough but I have my doubts and still feel that active measures such as cutting VAT back to 17.5% for say 6 months are needed.

        We shall have to wait and see and I would keep the champers on ice a little longer before indulging in celebratory ballyhoo.

        Comment by Steve Foley | October 26, 2012

  2. Much as this is welcome and we all need to see growth, the signs foor the next quarter are far from good. The chances are that this is just a one off unfortunately and the next figure will be close to zero growth.

    Comment by Howard Thomas | November 11, 2012 | Reply

    • That is possible but I would expect a figure of 0.4-0.5% growth in the next quarter.

      Comment by Richard Willis | November 11, 2012 | Reply


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