The UK economy – what a difference a year makes

January 28, 2014

This time last year, an imminent sovereign credit rating downgrade and a 1-in-3 chance of a new recession dominated talk on Britain’s economy.

To say 2013 turned out better than expected – at least by the simple yardsticks of economic growth and unemployment – would be an understatement, then, even if tepid wage growth, weak productivity and a rising cost of living still dog the economy.

None of the 63 forecasters polled by Reuters in Jan last year predicted that growth for the 2013 as a whole would hit 1.9 percent, as official data showed on Tuesday.

Back then, the consensus showed the economy would only grow around 1.0 percent, and many flagged some big downside risks even to that outlook.

That pessimism was summed up in the sub-header in the story for that’s month’s poll: “Bumping along the bottom”.

Economists take a lot of flak for missing turning points in major economies, most notably their collective failure to spot the severe recession of 2008-09 until it had already started.

But before dismissing 2013’s larger-than-expected upturn as another “miss”, it should be noted that economists got a lot right about the UK economy this year.

The Reuters poll consensus was spot-on in predicting the each of the Office for National Statistics’ preliminary GDP releases for the last three quarters of 2013, and only slightly undershot first quarter’s reading.

This year, economists reckon growth will hit 2.5 percent.

So far, the omens are good.

One comment

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It’s not the growth in GDP that we have to look too but the growth in debt. Indeed if things are so good why doesn’t the chancellor tell people like it really is and where PwC’s (one of the ‘big’ four accountants) chief economist predicted in 2009 on far better growth projections than has actually happened, that the total UK debt would be a staggering £10.2 trillion by 2015 and as much as possibly £11.5 trillion? PwC’s breakdown was,

Households Debt – £1.9 Trillion
General Government Debt – £1.4 Trillion
Non Financial Company Debt – £2.2 Trillion
Financial sector Debt – £4.5 Trillion pwc-projects-total-uk-public-and-private -debt-to-hit-10-trillion-by-2015.html

The question is how can we ever repay this huge debt as last year we were in reality not even keeping up with the interest payments never mind reducing the debt and which was still increasing. Unfortunately it appears that it will do now in perpetuity as the economy can’t really pay its way out of things.

When you analyse the total wealth of the UK (everything) according to the ONS, the whole country is not even worth £7 trillion, so make your own conclusions.

It appears therefore that the government really do live in a parallel universe or two?

Dr David Hill
World Innovation Foundation

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