Hello blog viewers,
I return this week to the stuttering state of the UK economic recovery, and although GDP for the last quarter showed a better than expected 1.1% increase in UK productivity, I remain worried about the possible dent to consumer confidence with the VAT increase to 20% due next year.
I’ve banged on before in these blogs about the need to kick-start growth in the UK economy as there is much focus on cutting the public sector. Clearly cuts in public spending are already occurring and more are inevitable, but such cuts could place growth in jeopardy – especially as long-unemployment is rising and – in my view – will accelerate with approximate public sector job loss to be at least 600,000 by 2015 according to Office for Budget Responsibility figures.
Recent estimates from the National Institute of Economic and Social Research (NIESR) indicate that chill winds are still cooling our recovery. To illustrate this point a NIESR economic forecaster warns of, “…headwinds, as fiscal consolidation both in the UK and the eurozone restrict growth. There is clearly a risk that this rate of growth will not be maintained through the rest of the year.”
NIESR also caution “Growth prospects in advanced economies could suffer if overly severe or poorly planned fiscal consolidation stifles weak domestic demand,”
In my view much could be done at a federal and local level to stimulate UK economic growth by ensuring new jobs are generated and workforce skills are improved (see Beveridge Curve blog and my comments in Louisa Peacock’s article in the Daily Telegraph Business Section, page 10, Thursday 22 July 2010). A local investment cycle (stimulating growth, leading to gainful employment, reducing benefit burden and re-investing taxable contributions back into the economy) would see those nasty headwinds dying down.
Are you blown away by this argument, or am I just talking hot air?