UK set to be the fastest growing economy in the West for 2014?
According to the UK Business Confidence Monitor, Britain is set to be the West’s fastest growing economy at the beginning of 2014. The report which is produced by accountants Grant Thornton and the Institute of Chartered Accountants in England and Wales (ICAEW), hit +24 during the third quarter, the highest reading since the second quarter of 2010. The ICAEW now predicts 1.3% growth in the final quarter of 2013. It also states that turnover and profit growth have picked up and are expected to grow faster over the next 12 months.
The report comes hot on the heels of a range of different reports over the past few months that have pointed towards growth across manufacturing and construction in the UK, plus a preliminary report from the Office for National Statistics (ONS) which, based on 40% of the available data, suggests the UK economy grew by 0.8% in the three months to the end of September.
Furthermore, the report’s view of the economy also mirrors that of the CBI, whose recent assessment also suggest a strong pick-up in growth – around 1.4%. The CBI’s public stance is that the UK economy is recovering at a “slow and steady” pace.
This latest report means we have now had five consecutive quarters of continued rising confidence – the longest sustained period of increasing optimism since the recession kicked in – and this suggests that the economic recovery is continuing to gain momentum.
“UK business confidence has now been rising for over a year, the longest sustained period since 2007. There are also signs that the economic recovery is broadening to encompass business investments and exports,” said Michael Izza, ICAEW chief executive. “If this trend continues, the economy will have some strong foundations on which to build in 2014 and beyond.”
Grant Thornton UK LLP CEO Scott Barnes added: “Growth is all about doing more business – with turnover, profit and exports all heading up, it’s a clear indication of business leading the way.”
And there’s good news for recruiters. When it comes to employment, the report highlights the fact that UK businesses are reporting the strongest expected employment growth since the start of the financial crisis with an average increase of 1.7% in headcount over the next 12 months. This growth covers all sectors apart from Banking, Finance & Insurance, which has shed jobs over the past year and expects to continue to do so.
As the economic recovery continues, staff turnover and skills availability are likely to become more of an issue. This is not however likely to be reflected in salaries, with a growth of just 1.8% predicted over the coming year, well below current inflation levels.
This points to the fact that despite the overall sense of optimism, the recovery is still far from being completely secure. Spare capacity remains in the economy and weak pay growth is likely to continue the squeeze on household incomes.
Izza added: “A key marker of recovery to UK households is employment. This is a positive sign even with modest salary rises. However we cannot be complacent and all of us need work hard to maintain the momentum built up this year while remaining alive to the threats to our recovery, especially those outside the UK. So while business confidence is strong and the anecdotal evidence I hear from our members suggests that things are getting better, we still have some way to go and certainly can’t be sit back.”
Meanwhile, as the UK economy recovers Chancellor George Osborne has claimed his austerity programme of public spending cuts is vindicated. He said the cuts were necessary to restore faith in the UK public finances by narrowing the country’s deficit.
His critics, however, say the recovery was delayed by his cuts and is slower than it should be. Others, including banking giant HSBC, have warned that Osborne should focus on the quality of the recovery because not enough has been done to lift exports and rebalance away from debt-driven consumption.
So while this may seem like an early Christmas present, we you might still want to maintain a tight grip on your purse strings for a little while longer.