Britain on course for a solid economic recovery
Print Edition
UK Prime Minister David Cameron may be close to pulling off one of the most significant feats of his premiership: delivering a solid economic recovery ahead of a 2015 election.
Two consecutive quarters of growth have shifted the sands of British politics: six months ago, members of his Conservative party warned him that failure to lead Britain out of stagnation could cost him, and them, the election. Those fearful voices have fallen silent.
After cutting Britain’s biggest budget deficit since World War II by a third, Cameron leads what could be the fastest growing major economy in the European Union this year.
“Will the better economic data change the political landscape? Well, economics is the biggest issue,” said Steven Bell, director of multi-asset investment at F&C Asset Management. “Having pursued a policy of austerity, the government will get credibility both for prudent management and for the recovery,” said Bell. “They will get the credit for this.”
Britain’s US$2.5 trillion economy grew by 0.6 percent in the second quarter after a 0.3 percent rise in the first quarter, putting it on course to grow by at least 1.4 percent this year.
That would be the strongest annual growth since 2010, the year Cameron forced Labour’s Gordon Brown from office by forming a coalition government with the Liberal Democrats after no party won an outright majority in a general election.
“The recovery could have happened a lot sooner with a bit more government support for infrastructure spending in particular,” said Trevor Greetham, asset allocation director for Fidelity’s Investment Solution Group.
But Labour says improving economic data shows no signs of translating into higher living standards.
“It may be a recovery for those at the top, but it is not a recovery for most people,” a senior Labour source said. “For most, living standards are being squeezed as inflation outstrips wages more and more. This is what we’re going to be pointing out.”
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