UK economy: 'It's going to be a difficult few months' says expert
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The news comes as the economic growth was slower than first thought, even prior to the arrival of the Omicron variant of the COVID-19 virus which has also cast doubt on the economy.The Office for National Statistics (ONS) said during the quarter before Omicron took hold, the economy grew by 1.1 percent, rather than 1.3 percent, as Britain emerged from lockdown.
Taking to Twitter to question the Prime Minister’s ability to pull Britain through tough financial times, Conservative MP for Wokingham, Sir John Redwood suggested the blame lies with still following EU rules.
He said: “Yesterday I asked the government why the new economic policy rules look just like the EU rules we used to obey.”
He added: “Looks like a Maastricht tribute act. We need to make controlling inflation and speeding growth the central aims.”
The economy is now 1.5 percent smaller than it was before the coronavirus pandemic.
The data pre-dates the emergence of the Omicron variant of Covid, which is expected to be a further drag on growth.
Darren Morgan, director of economic statistics at the ONS, said: “Our revised figures show UK GDP (gross domestic product) recovered a little slower in the third quarter, with much weaker performances from health and hairdressers across the quarter, and the energy sector contracting more in September than we previously estimated.”
He added: “With the economy reopening in the third quarter, households saved less in the latest period. However, household saving was still up on pre-pandemic levels.”
More than 20, mostly small energy suppliers have gone bust in recent months due to increased wholesale gas prices making price promises to customers undeliverable.
Nearly four million other households have seen their supplier fail since the start of the pandemic, and a significant rise in bills is on the cards for about 15 million people in April.
Weakness in the health sector, where test and trace work and vaccinations tailed off, and among hairdressers were also behind the revised growth estimate.
However, Mr Morgan said stronger data for 2020 meant the economy was closer to pre-pandemic levels than first estimated.
The slump in Britain’s economy last year has now been estimated to be 9.4 percent, rather than 9.7 percent.
Business investment also fell by 2.5 percent in the three months to September and was nearly 12 percent below its pre-pandemic level.
But investors are braced for a further slowdown of GDP in the fourth quarter of 2021, and a weak start to 2022, due to the rise in COVID cases which has hurt Britain’s hospitality sector and hit retailers.
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Bethany Beckett, an economist at Capital Economics, said although the economy had got better at coping with coronavirus restrictions, the “possibility of tighter restrictions in January is further darkening the outlook for GDP”.
The ONS said Britain’s recovery to its pre-pandemic economy remained behind most other big rich economies such as France, Germany and the US, in inflation-adjusted terms.
UK inflation will run at more than double the Bank of England’s two per cent target for a whole year, reveals fresh forecasts published today.
The rate of price increases will peak at 6.7 percent this April, lifted higher by the energy bill cap being hoisted around 50 percent, according to investment bank BNP Paribas.
October’s 2021 official inflation rate hit 4.2 percent.
BNP Paribas predict the rate will not fall below four per cent until November this year, meaning the cost of living will remain at least double the Bank’s target for an entire year.
The predictions come as the International Monetary Fund warned yesterday emerging market economies need to prepare for potential currency fluctuations and financial market volatility triggered by the world’s top central banks tightening policy sharply this year.
Former London MEP Lance Forman, replying to Sir John’s Tweet summed up the situation by saying: “We need more politicians who understand business and economics so they are not simply led by Treasury officials who claim to, but don’t.”
Mr Forman in his own post also suggested the Government are to blame for the rising costs in the UK.
He said: “The Government solution to every problem nowadays seems to be “borrow more”. They sound like addicts on credit cards. This is rarely a good solution to anything.”
He ended: “It just kicks the can down the road. It’s a far bigger problem than climate change IMHO.”
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