28 Jan 2014

‘Goldilocks’ numbers show UK growth fastest since 2007

Today’s announcement of 0.7 per growth for the UK economy in the last quarter of 2013 is a “Goldilocks” number, says Economics Editor Faisal Islam – not too cold and not too hot.

Figures published by the Office for National Statistics (ONS) on Tuesday show there was growth of 0.7 per cent from October to December, down by 0.1 per cent on the previous quarter.

Growth over the full year – 1.9 per cent – was strong compared with 2012, when the economy increased in size by just 0.3 per cent.

But it was still some way behind 2007, before the banking crisis and recession, when gross domestic product grew by 3.4 per cent.

Growth rose by 0.5 per cent, 0.8 per cent, 0.8 per cent and 0.7 per cent in the four quarters of 2013.

Joe Grice, ONS chief economic adviser, said: “We have now seen four successive quarters of significant growth and the economy does seem to be improving more consistently.

“Today’s estimate suggests over four-fifths of the fall in GDP during the recession has been recovered, although it still remains 1.3 per cent below the pre-recession peak.”

(Video below: Economics Editor Faisal Islam explains the ONS figures)

‘Job not done’

The figures are a welcome boost for Chancellor George Osborne, whose austerity policies have been criticised by Labour and questioned by the International Monetary Fund.

Mr Osborne said: “These numbers are a boost for the economic security of hard-working people. Growth is broadly based, with manufacturing growing fastest of all. It is more evidence that our long-term economic plan is working.

“But the job is not done, and it is clear that the biggest risk now to the recovery would be abandoning the plan that’s delivering jobs and a brighter economic future.”

Prime Minister David Cameron tweeted: “The GDP figures are another sign our long-term economic plan is working – more growth means more jobs, security and opportunities for people.”

The government is hoping to achieve a rebalancing of the economy from consumer spending to manufacturing and exporting, but manufacturing came to a standstill in November, while the monthly trade deficit was more than £3bn.

This picture changed in the last three months of 2013, with manufacturing rising by 0.9 per cent, although the construction sector shrank by 0.3 per cent.

Manufacturing and construction are still below their pre-recession levels, down 8.2 per cent and 11.2 per cent respectively, but the services sector grew by 0.8 per cent at the end of 2013 and is now bigger than it was in 2008.

Even so, members of the government are concerned that the recovery could be short lived, with Business Secretary Vince Cable warning that the housing boom, encouraged by the help to buy programme, could hit growth.

‘No recovery at all’

Despite the positive figures, shadow chancellor Ed Balls said people were still worse off. “Today’s growth figures are welcome and long overdue after three damaging years of flatlining. But for working people facing a cost-of-living crisis, this is still no recovery at all,” he said.

“Wages are now down £1,600 a year after inflation under David Cameron and tax and benefit changes since 2010 have left families worse off by an average of £891 this year.

On BBC Newsnight, Mr Balls defended his decision to reimpose the 50p top rate of tax if Labour wins the next general election, saying that it was important to reduce the deficit.

“It is for the next parliament as we get the deficit down. We will get the deficit down in the next parliament using the 50p rate,” he said.