• Text size      
  • Send this article to a friend
  • Print this article

A triple dip is avoided – for now

We have been here before.

Better-than-expected growth statistics following on from a period of slump are encouraging, but by no means the end of uncertainty. It has been a long, slow tramp through the economic gloom, but is the UK finally emerging into the sunlit uplands of prosperity or could this be yet another false dawn?

A closer look at the drivers of growth in the last quarter perhaps offers some clues. It is encouraging that the huge service sector has grown by 0.6%, with a particularly strong showing by hotels and restaurants. This would tend to suggest consumers are feeling sufficiently confident about the future to splash out more.

Still, other vital sectors of the economy remain in the doldrums, with construction falling 2.5% in the first quarter, and manufacturing and exports barely improving; all in all, the signs of recovery are far from comprehensive.

What is more, yesterday's figure of 0.3% growth in the first three months of 2013 is merely a preliminary snapshot, an early estimate that will be subject to further revision when more data becomes available (though it does chime in with positive Scottish GDP growth figures for the last quarter of 2012, released last week).

Given the wafer thin numbers, it is no surprise they have been given such a cautious welcome by ministers who fear the apparent signs of recovery might once again be a mirage. A triple-dip recession, though now less likely, is still possible.

In spite of that, George Osborne and David Cameron will sleep just a little more easily in their beds following this latest fillip. They and their supporters will hope it will go some way to mollifying critics of their severe austerity programme, including the International Monetary Fund, which recently called in the Chancellor to relax his £130 billion package of spending cuts.

That is likely to be a vain hope. When Mr Osborne embarked upon the current programme of cuts three years ago it was with the stated overall aim of reducing the country's budget deficit, which had grown to the point where it threatened the UK's precious AAA credit rating. Three years on, progress on reducing the deficit has stalled and Britain has been downgraded by two credit ratings agencies anyway, in spite of the pitiless austerity programme.

Even though there has been a slight upturn in GDP in the first three months of this year, a loosening of fiscal constraints is required to help coax this weak flame into a blaze; Mr Osborne must heed those calls if he does not want his stubborn approach to be discredited for a third time by sliding GDP figures a few months from now.

Given all of that, the Shadow Chancellor Ed Balls is right to call it like it is, highlighting that the economy has effectively been flatlining for three years, but he and his Labour colleagues also have a responsibility not to talk away consumer confidence by adopting the mantle of doomsayers to score political points.

There is a chance the UK economy could finally be turning the corner and it is incumbent on politicians of all parties to handle this fragile potential recovery with the greatest care.

Contextual targeting label: 
Local government

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

154187