It’s over five years since the economic crisis began and since then businesses and households up and down the UK have been hanging in the balance.
Soaring rates of inflation and low consumer confidence have all had an impact on spending and saving behaviour. While the economy is nowhere near its 2008 peak, there have been promising signs of an economic recovery in recent months.
One of the biggest factors in the claims of a recovery is GDP, as the Office for National Statistics found that it grew by 0.7% in one month. This follows a 0.3% increase in the previous month.
This exceeds estimates and puts the UK’s growth somewhere near that of Germany. The improved performance has led the OECD to revise its forecast for GDP growth, to 1.5% from 0.8%.
While Britain has performed well, some other new markets haven’t faired quite as well. For example, China has been downgraded to 7.4%, compared to its previous forecast of 7.8%.
After the amended figures of the OECD, the Office for Budget Responsibility is also set to revise its own GDP forecast.
It’s always a good sign for the economy when consumers are willing to go out and spend money.
After months, or even years, of restrained spending, retail spending is finally on the rise. July saw a 3% increase on the year before in real terms, but almost 5% up in cash terms.
The motoring industry has been particularly strong, with sales of cars on the rise for the 17th consecutive month and 12.7% up on the previous July.
Small business confidence
It’s not just consumers that are benefitting from the improvements in the British economy; small businesses have also shown increased confidence.
The Federation of Small Businesses (FSB) has recently published a Small Business Index, which measures confidence. It rose to 33.5 in the third quarter, a substantial increase its previous high of 18 was recorded in 2010.
More firms are now looking to take on staff, rather than make cuts, and with more workers available, they are confident to expand further. Around 40% of firms also reported higher revenues in 2013 and many of them also plan to increase capital investment over the next 12 months.
Employment rates rising
Thankfully, with more small businesses having the confidence to employ more staff, employment rates are also on the rise.
The Office of National Statistics also found that the number of Scots in employment was the highest it had been since 2009.
The Bank of Scotland chief economist, Donald MacRae recently commented on how quickly the Scottish economy is recovering. The bank’s PMI survey found that employment is rising faster than it has done in over six years – although it’s still below the national average.
With Scottish employment is up for the ninth month in a row, the only other place in the UK to better the rates was the West Midlands. Mr MacRae also mentioned that the PMI survey found that there has been an increase in new work and business activity as well as employment.
Impact on interest rates
The Bank of England has claimed that it had no plans to increase the 0.5% base rate while unemployment was above 7%, which it expected to take at least three years.
However, with an apparent recovery in full swing it’s possible that more people might end up in employment sooner than expected.
Should the base rate be increased, borrowers could be affected.
Concern for unsustainable growth
Despite the good news around the economy, there has been some concern about unsustainable and unbalanced growth.
The services sector has seen the biggest improvements, whereas the manufacturing industry has not seen an increase, with output growing by less than 1% a year since 2009.
However, others are claiming that UK manufacturing will never get to the level it was before the economic crisis.
So, while it might not be completely balanced, the economy is on its way to recovery. The growth of GDP, better employment rates and a boost in business confidence are just a couple of the signs that the UK is finding its feet once again.