The Confederation of British Industry has today released a report proclaiming that the UK economy is growing faster than at any other point since the onset of the financial crisis in 2008. The figures were derived from the ‘growth indicator’, the CBI’s tool for measuring the state of the economy. What the tool has shown is that the output for UK industry has risen month on month for the last quarter of 2013, figures which are deemed to bolster the belief that the UK economy will continue to improve into 2014.
It is expected to be the case that this positive set of figures will establish 2013 as the best performance UK industry has seen since the beginning of the credit crisis, and it certainly appears that confidence in the economy has returned. The figures listed by the CBI show that a 30 per cent plus-balance was collated for business firms stating there was a rise in production output, against those that claimed there was not. This is the highest improvement for these figures since a poll was taken in late 2007.
Last week the International Monetary Fund issued projections that the UK economy would grow by a further 2.4 per cent in 2014. The IMF are so positive in their outlook for growth that it was also noted that the UK economy is currently growing faster than any other large trading nation in the world. In addition to this, the Office of National Statistics are expected to report growth during the final quarter of 2013 to have been 0.7 per cent, with the overall growth of the UK economy for the year an encouraging 1.9 per cent.
The chief policy director for CBI, Katja Hall, has said: ‘A picture is unfolding of a real upsurge in output across much of the UK economy. Many firms in many sectors are feeling brighter about their prospects than they have for a long time, showing the recovery is gaining traction.’
While the improvements to growth do not necessarily mean that interest rates for borrowing will increase this year, some leading economists have suggested that the Bank of England should make minor increases to lessen the impact to UK households over time. Mark Carney was last week quoted on the issue as stating that the drop to the level of unemployment in the UK to 7.3% did form part of the BOE’s forward planning to make interest rate adjustments, but it was not the ‘trigger’ for this to occur. The suggestion is that the BOE will look into early 2015 before making any further changes.
A former member of the Monetary Policy Committee, Andrew Sentence, feels that true recovery will not be possible unless large scale changes are made to monetary policy in the UK. Sentence argues that the base rate should rise over the coming year to enable the recovery to continue at its current pace. He also sees a change to way that public monies are spent, and a freer hand with global trade will assist the economic stabilisation, but the most integral factor will be increasing the bank base rate to previous levels.
Sentence outlined his biggest concern that longer term delays with rates increases will shock business owners and borrowers more, than if an instant incremental plan was introduced. Sentence said: “If this is not done gradually with a lot of planning, it is going to come as a big shock.”
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