UK government braces for GDP figures

David Cameron

Critical figures set to be released will reveal whether the UK economy has rebounded from a shock decline and is tough enough to withstand the Government’s severe spending cuts.

Economists expect gross domestic product (GDP) – a broad measure for the total economy – to have grown by anything from 0.2% to 1.2% in the three months to March following the surprise 0.5% contraction in the final quarter of 2010.

But analysts have warned that anything less than 1% will be disappointing, and the figures are likely to show average growth over the last two quarters was broadly flat.

The figure, released by the Office for National Statistics, is subject to revision, but will put the coalition Government’s deficit-busting plans under the spotlight once again.

It will indicate whether the economy is robust enough to withstand the fiscal squeeze. However, Chancellor George Osborne on Tuesday told Cabinet colleagues that the UK economy was “on the right track”.

Policy-makers at the Bank of England are awaiting the figures to help determine whether the economy is strong enough to withstand an interest rate hike, as inflation continues to sit well above the Government’s 2% target.

The severe weather in December was blamed for the unexpected reversal in GDP in the three months to December, though activity would have been flat without the Arctic conditions.

The weakness raised doubts over the timing and size of the Chancellor’s £81 billion package of spending cuts and the VAT hike from 17.5% to 20%.

A Downing Street spokeswoman said: “We are dealing with a record deficit and huge debt, but if you look at the international picture, particularly the eurozone and also continued concern about the US debt picture, we are on the right track.”

But Angela Eagle, Labour’s shadow chief secretary to the Treasury, warned: “Our economy should not just be making up all the lost ground from the end of last year but growing strongly on top of that.”
Source: Press Association

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