THE UK ECONOMY - WILL THE BENEFITS OF GROWTH BE FELT BY EVERYONE?
But not only did the economy grow in the first three months of 2013 but a revised analysis showed that it hadn’t even entered a double dip recession in the previous year.
Even then, there were those who were ready to rubbish the way that businesses were working hard to create jobs following the worst recession in living memory.
Yet, the critics have been confounded time and time again as the economy continues to show a remarkable recovery. The latest official figures showed that it had grown by 0.8 per cent between July and September and this follows earlier growth of 0.7 per cent between April and June.
Not surprisingly, the Chancellor of the Exchequer has been reluctant to say that we are well on the road to recovery, stating that there is much that remains to be done to rebalance the economy.
However, it is clear that there is a growing feeling amongst the business community that we have weathered the worst and are on the way back to recovery.
The ICAEW – the body that represents English and Welsh accountants – has predicted that there will be further economic growth of 1.3 per cent in the final quarter of 2013 and that the UK will be come the fastest growing western economy, outpacing even Germany and the USA. More relevantly, it says that business confidence is at its highest for the ten years it has been running its survey.
And last week, the Markit/CIPS PMI for September showed expansion across all sectors of the economy. In the services sector, which accounts for more than three quarters of the UK economy, activity and employment rose at the fastest rate in more than sixteen years.
Similarly, manufacturing experienced the fastest growth in export orders in more than two years and even the construction industry, which has often lagged manufacturing and services, is growing again at the fastest rate in six years.
In previous years, this news would normally have had UK Government ministers dancing in the corridors of Westminster.
Yet this good news has been muted by two concerns.
The first is the Bank of England’s position over interest rates that have remained at 0.5 per cent since March 2009. Some analysts believe that if the economy is perceived to be growing too quickly, the Bank of England could raise interest rates too soon and that could dampen down any recovery when businesses are looking to invest. However, there is also the danger that the economy could overheat if interest rates are not raised soon enough if, for example, there is danger of house prices increasing too quickly.
The second is the concern that many are not yet feeling the recovery in their pockets.
During the last few weeks, we have seen the power companies SSE, British Gas and nPower increase their prices by between 8 and 10 per cent. Given this, it is not surprising that a survey by the UK Government found that 84 per cent of people are concerned about steep rises in energy prices in the future with that almost half the population worried about paying their bills.
The consumer group Which also found that rising food prices are a source of stress to four in ten shoppers while 29 per cent said they were struggling to feed themselves or their family.
Yet, one of the flagship policies of the coalition government at Westminster has been to ensure that hundreds of thousands of low paid workers are no longer paying taxes due to the upgrading of personal allowances since 2010.
However, with wages across many sectors of the UK economy remaining broadly flat since the recession of 2008, the effect on take home pay has been minimal especially as inflation continues to erode the paypackets of ordinary workers up and down the country.
In fact, this recession was very different to that normally experienced in the world of work. Whilst some economists were predicting unemployment to hit 5 million under this Government, it peaked at roughly half of that number mainly because businesses, especially small firms, were reluctant to make their staff redundant.
Indeed, many workers have been kept on when, in previous economic downturns, they would have lost their jobs.
Of course, the consequence of keeping people employed at a time of reduced output is that there have been few pay rises in the last few years whilst prices for essential household items have increased considerably. As a result, many are not yet feeling that the recent economic growth is benefiting their family.
Therefore, it would seem that the next general election will not be fought on whether the economy has recovered as it is almost certain that the UK will be one of the fastest growing economies in Europe by 2015. Instead, the next government of this country will be represented by those who can best persuade ordinary workers up and down the country that they have the policies to ensure that everyone will be sharing the rewards of that economic recovery.