Thursday, 25 October 2012

The UK's return to growth: two cheers?


So it's official. According to the Office for National Statistics (the ONS), the UK economy is growing again (above). And pretty quickly, too. This column has always predicted that the permafrost couldn't last forever - and so it has proved.

The UK has so many economic strengths - in high-quality engineering, in financial services, in travel and tourism, in education, and (as noted by the ONS today) in the creative industries - that it's been more of a surprise to see it so flat on its back for so long. Despite all its structural problems - particularly in housing, and in providing jobs for young people - you'd be hard pressed to hold this innovative and well-placed nation down for too long.

And there's so much slack to take up. Just so much. Take a look at the graph on the National Institute of Economic and Social Research's website. We're now four and a half years into the worst economic crisis of modern times, and we're still much poorer than we were in 2007-2008. In fact, the economy's smaller than it was even at the end of last year. It's always the same: just when we get the gloomiest, then the sun starts to peep through the clouds. Like in 1992-93. Or 1982-83. Or 1976-77. Once you really feel that you've hit bottom, then you can look upwards.

So slaps on the back and champagne all round, then? Well, not so fast. Growth had been held down in quarter two by bank holidays, bad weather and a royal wedding - and all the ticket sales for the Olympics have been added into quarter three. There's no way in the world that we're going to continue to grow at one per cent per quarter - which would amount to a stellar four per cent a year, of course. What with the Government still hell-bent on its (self-defeating) budgetary masochism, still miles from its absurd one-Parliament targets with almost all the cuts still to come, and with the Eurozone threatening to go into recession, there's a long and a rocky road ahead.

So all things being equal, we'll move ahead now, not so rapidly as we did over the last quarter, but slowly (if erratically) - though we'll be climbing out of a much bigger hold than we might have dug ourselves.

'All things being equal' is the key phrase: no Spanish banking failure, no American fiscal cliff, no deep Eurozone recession, and no insistence on ever-deeper budget cuts. That's a lot of 'ifs', I'm afraid.

This is a bit of a cliche, to be honest, but I'll try it: this is not the end. This is not even the beginning of the end. But it might just be the end of the beginning.

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