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Britain avoids triple-dip recession
Britain has comfortably avoided a triple-dip recession, according to official figures that show the economy grew by 0.3% in the first quarter of the year.
Following a miserable 0.3% contraction in the final quarter of 2012, many feared the economy was headed back into recession – defined as two consecutive quarters of negative growth.
But the Office for National Statistics today revealed that gross domestic product (GDP) grew by 0.3% - far higher than the 0.1% analysts had predicted.
It might seem a minor improvement, but it will prove a massive relief to George Osborne.
Critics want an end to austerity
The chancellor has been coming under mounting pressure to change economic course, with critics claiming his austerity measures are stifling economic growth.
Just last week, the influential International Monetary Fund (IMF) suggested that Osborne “take stock” of his plan A, before slashing its UK growth forecast for this year from 1% to 0.7%.
So while today’s increase in GDP is hardly a resounding endorsement of Osborne’s economic strategy, it will ease the pressure somewhat.
Certainly, if we hadn’t successfully dodged the triple-dip bullet, Labour’s claims that Osborne is an impediment to UK growth would have been given more credence.
Now, the chancellor has bought himself valuable time to try and achieve stable and lasting growth.
So how does he plan to achieve it?
As the IMF pointed out, a key problem for Osborne is that growth in the private sector is being hampered by a lack of credit.
To help get banks lending again and boost the flow of fresh capital to businesses, the government launched its much-vaunted Funding for Lending Scheme (FLS) last year.
The initiative basically gives the banks access to cheap credit on the provision that they pass it on to the private sector.
And while FLS has benefitted homeowners in the form of extraordinarily cheap mortgages, many businesses remain starved of credit.
Figures from the Bank of England showed that lending to companies slumped by £4.8 billion in the three months to February, in a clear sign that the FLS was failing this sector.
The government knows well that the success of this sector is key to pulling Britain out of the economic doldrums, and has this week dramatically ramped up the scheme with a specific focus on small to medium enterprises (SMEs).
Under the original scheme, banks can access low-interest funding in return for lending to households and businesses. Now, they are being told that the amount of funding available will be increased up to tenfold when based on lending to SMEs.
Expect uninspiring growth
Only time will tell how successful the initiative proves, but its importance can’t be overstated - the government is relying heavily on the FLS to revive our economic fortunes.
After narrowly achieving growth in this quarter (and it’s worth stressing that the figures could be revised upwards or downwards next month as more data becomes available), most analysts expect the economy to continue its upwards trend, albeit slowly and sluggishly.
But will that be enough for Osborne to claim his austerity measures are working?
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ITS ALRIGHT FOR ALL OF THEM, THEY HAVE THOUSANDS OR MILLIONS COMING INTO THERE BANK ACCOUNTS.
I HAVE NOTHING, NOT EVEN JOB SEEKERS ALLOWANCE, I DON,T KNOW WHAT IM GOING TO DO TO PAY BILLS.
ANY JOBS OUT THERE FOLKS, DOES ANYONE REALLY CARE AT ALL.
what a plank won't take sound advice from anybody else
Two key industries that help the economy grow
To days news
Service sector UP 0.6%
Service sector jobs include
money lenders, bookmakers, pawn brokers and charity shops
Tory economics at their worst I fear
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New research has found that families are spending an average of £180 on back-to-school supplies for their kids. Does this tally with your experience?
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- Yes, that sounds about right to me
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- No, the cost of new uniforms, stationery and sports kit takes us well past the £200 mark
- No, I wouldn’t spend anything like that amount on the little horrors!