UK economy on course for growth

The UK economy is set to grow by 1.2% this year and to 1.8% in 2014, statistics from the National Institute of Economical and Social Research (NIESR) have shown.

Unemployment will stay the same (8%) and consumer price inflation will also stick above 2.5% per annum this year, yet will drop back to 2.3% on average in 2014.

Despite figures looking positive for the rest of this year and into next year, NIESR has questioned whether or not the country experienced a single-dip or double-dip recession. “As we have argued for some time, the UK economy has been moribund since the second half of 2010,” it said.

“The latest Office for National Statistics (ONS) estimates suggest the 2008/9 recession was more severe than previously estimated, leaving GDP 1.3% further away from its pre-recession peak.”

Although the general outlook for the economy is one of “gradual gain”, NIESR noted one “potential risk” to its growth forecasts. It said a predicted rise in consumer spending will raise economic momentum, but will come at the expense of household saving. “One potential ‘risk’ to the growth forecast is that these low saving rates are not sustained. Consumer spending growth is a necessary component of any recovery in the UK economy, a balanced recovery will require a significant contribution from net trade and gross fixed capital formation.”

It also explained that a recovery driven primarily by consumer spending was worrying in the long-term. And it said a gradual gain in economic momentum would not be enough to close the “large negative output gap” or reduce unemployment.