It was confirmed on Friday that the UK’s economy had now reached the same GDP levels before the recession hit in 2008, and had actually just edged ahead of that level by 0.2%. The Office for National Statistics announced that GDP in the second quarter to June rose by 0.8%. They also said that the economy had grown by 3.1% since the second quarter of last year. The good news continues too as the IMF once again upped the UK’s estimated yearly growth in 2014 from 2.8% to 3.2%.
So what does all this really mean?
World Leading Economy
Although it may seem hard to believe, other than the Chinese and Indian economies, the UK is one of the world’s strongest performing economies right now. Being able to write that very sentence would have seemed ridiculous just a couple of years ago. But when you look at the weak growth in the Eurozone, and the American economy is going into stall mode again. But the UK, after coming out of the other end of the Great Recession, is showing much of the world how to do it.
Areas of growth seem to be centered around construction. Growth in that sector alone is predicted to be north of 7% this year. It seems odd in a way, we’re all complaining that we’re not actually building enough in the way of new homes. So if the Government actually feels compelled to pull it’s fingers from out their rear ends and REALLY get stuck into a worthwhile housing scheme, growth in the construction sector could really boom.
Finance also seems to be performing well, with most banks now reporting healthy profits again. The problem I have with this though is that the finance sector is very much rooted in London, with the effects of the finance sector not really felt outside the capital’s borders.
Healthy Economy Means Healthy Industry
Our industry is very much affected by the overall economy. We saw this when it dropped off a cliff half way through 2008. The change in fortunes was profound. But I think it is safe to say that the recovery of our economy has been way stronger than most people have anticipated.
It wasn’t too long ago that many were predicting a recovery that was going to have us bump along the ground for quite a while before we saw all started to see any sort of benefit. But thanks to a storming construction sector, rather overheating property bubble and strong financial and export markets, the UK is doing pretty damn well right now.
There remains risks however we should all be keeping an eye on. Firstly, interest rates. The BoE has been cautiously warning us now for a while that before long interest rates will have to rise. They probably won’t rise dramatically, but once they do, there is a risk that mortgages that were pinned on low interest rates may start to become a financial burden to a lot of families. Then there is that overheating property bubble. Although it is in the south of the UK, if it was ever to burst, it would have an effect on the whole country, and won’t be just limited to that region. Lastly there are wages. At some point they will have to start rising by more than inflation. The longer that continues, the harder it will be for some families to make ends meet.
As always, all comments welcome in the section below!