Britain to make ‘stronger’ exit from recession

The IMF lifted forecasts across the board due to the impact of action by several governments as well as signs of firmer house prices, recovering consumer confidence and a pick-up in world trade.

The UK will lag behind the 1.3 per cent growth expected for the US although it will perform more strongly than the Eurozone, where the IMF predicts a 0.3 per cent rise in output. Ben Bernanke, chairman of the US Federal Reserve, recently said it is highly likely the world’s biggest economy has already emerged from recession, though he cautioned that recovery will be slow. Yesterday, new figures revealed that US GDP fell by 0.7 per cent in the second quarter, lower than the 1 per cent previously reported and was also better than the 1.2 per cent contraction which Wall Street had expected.

Britain is widely expected to emerge from recession by the end of this year, and this week final GDP figures for the second quarter revealed that the economy had shrunk by 0.6 per cent, above the 0.7 per cent contraction originally estimated.

However, Alistair Darling, the Chancellor, struck a cautious note at the Labour party conference this week.

He told delegates: “Many independent forecasters now believe the UK is coming out of recession. I think it is too early to say so with total confidence. But I stick with my budget prediction that, as long as we continue to support the economy, recovery will be under way in the UK by the turn of the year.”

While yesterday, the IMF warned that Britain’s recovery could be at risk because a possible credit shortfall of £180 billion next year, caused by the weakness of the banking sector and the state budget deficit.

The Times revealed this morning that Labour is planning to halve Britain’s deficit with spending cuts and asset sales worth £75 billion without resorting to further tax rises.

Senior ministers are demanding that the pay of judges, top civil servants and NHS managers be frozen within weeks as the cuts package begins to bite. The remaining five million public sector workers can expect only minimal rises, union leaders have been warned privately. They had told the Prime Minister that protecting existing jobs was their chief priority.

Gordon Brown is looking at “a very big list” of defence procurement orders. He plans to shelve or scrap capital projects to pay for new equipment for troops in Afghanistan, seen as an overwhelming political priority.  (Times Online) http://business.timesonline.co.uk/tol/business/markets/article6856618.ece

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