UK economy: growth is looking up but there are hurdles ahead

If the UK economy were a horse it would be gearing up to race in the Derby. When all the economic surveys display the kind of vigour and confidence associated with a champion racer, it is no wonder so many traders in the City of London are putting bets on soaring GDP growth.

The pace of growth, and falls in unemployment, are gaining ground on the Bank of England's 2016 target for a rise in interest rates.

Could it be 2015 that rates rise, or even next year, they ask.

A GDP figure of 0.7% or above for the third quarter will generate plenty of headlines claiming that the economy is in fine fettle. Yet the next couple of years look less like a flat race, and more like a hurdle.

The CBI's survey of manufacturers revealed a disappointing drop in export growth. Business surveys from the continent, still the UK's biggest export destination, showed that while the big beasts of Europe were growing, they were moving forward at a snail's pace.

At home, rising energy bills and struggling banks are expected to place a drag on consumer spending and investment.

When Lord King quit as Bank of England governor in the summer, he said the recovery would be bumpy. Despite a strong GDP figure, the data suggests he was right to bet against an easy win.

Powered by article was written by Phillip Inman, for The Guardian on Thursday 24th October 2013 22.19 Europe/London © Guardian News and Media Limited 2010


image: © Bank of England

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