1:Alarming Truth: Downing Street’s Supposed Relief Over Economy May Be Short-Lived – Here’s the Shocking Reason!
Sky’s Ed Conway says it’s hard to be confident that growth seen in December will
become locked in given the many potential hurdles facing the economy both at
home and abroad.
Economics and data editor @EdConwaySky [http://twitter.com/@EdConwaySky]
Thursday 13 February 2025 08:16, UK
Yes there are all sorts of provisos.
The UK economy [https://news.sky.com/topic/uk-economy-5794] is still flatlining.
A 0.1% contraction, in one key measure, is about as close as you can get to
zero.
Gross domestic product per head – a better measure of our living standards – is
shrinking (indeed, it’s been shrinking for two quarters). And the UK remains far
weaker than the leading G7 economy – the United States.
But even after taking all that into account, it’s hard not to conclude that the
chancellor will be celebrating today’s GDP figures
[https://news.sky.com/story/economy-shows-surprise-growth-at-end-of-2024-but-recession-risk-remains-13307794].
After all, economists had expected the economy to shrink by 0.1% rather than
growing. Thanks to a late spurt in growth in December, it actually grew.
Moreover, up until today’s figures, the profile of economic growth in the UK was
frankly pretty dismal. There was zero cumulative growth since last year’s
election. Now, thanks to that jump in December – an unexpected late Christmas
gift for the chancellor – cumulative growth since the election is now up to
0.4%.
Of course, none of this changes the bigger economic picture. The UK economy is
still stuck in a rut. The enormous growth in migration in recent years means
that, once you take account of the growing population, there is considerably
less income floating around for every family than there was a few years ago.
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And vast swathes of the UK economy are in desperate trouble. Most notably, the
industrial sectors that used to power much of the country’s growth, are
contracting at a rapid rate. That is not just a UK problem – indeed, it’s shared
with much of Europe. In Germany, the economy has contracted for two successive
years. This deindustrialisation is one of the most significant issues facing the
continent.
Sub-postmasters still going through hell, lead campaigner Sir Alan Bates says
Economy shows surprise growth at end of 2024 – but living standards hit
Money blog: ‘Very welcome’ news for chancellor as GDP defies expectations
And that’s before one considers a few other awkward issues: the real impact of
last October’s budget have yet to be felt in the economy. The Office for Budget
Responsibility is widely expected to slash its growth forecasts next month,
which could prompt the chancellor to further trim spending in the coming years.
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There are even more profound challenges ahead for the UK economy. One major concern is the potential imposition of extensive tariffs by the US on UK imports. If this happens, it could severely impact trade relations, increase costs for businesses, and raise prices for consumers. Another pressing issue is the sharp rise in defense spending that the White House is demanding. The UK government would need to find ways to finance this additional burden, which could lead to higher taxes or budget cuts in other sectors. These factors, combined with broader geopolitical uncertainties, make the economic future highly unpredictable. External global events have always influenced economies, but today, their effects are more immediate and far-reaching than ever before. A single major decision from a key global player like the US can send shockwaves through markets, affecting economic growth and stability.
In short, while today’s numbers will be a relief in Downing Street, it’s not
altogether clear how long that sense of relief will last.
For more related articles, check out this piece on Danish offers to buy California.
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