There’s good news this morning as George Osbourne has announced that the UK economy has emerged from the double dip recession, posting 1% growth in the third quarter of 2012. He has of course used this as evidence that his policies has paved the way for recovery and have put Britain on the right track. In the run up to the autumn statement on Dec 5th, this is just the news that the Chancellor and the government will have been looking for, especially in light of all the opposition to cuts and the questionable success of its small business lending schemes.
Osbourne has commented: ‘There is still a long way to go, but these figures show we are on the right track. This is another sign that the economy is healing and we have the right approach.’
However, are these figures really a demonstration of real growth in the economy? Certain experts have pointed out that short term factors might be disguising the reality of the current economic situation. The Olympics are one such example, as well as the bounce back after June’s extra bank holiday for the Queen’s Diamond Jubilee.
Indeed, all of the income from Olympics ticket sales was counted as economic output in Q3 – not only during the quarter but whenever it was spent, even when tickets were bought far in advance. This alone could have added 0.2% to the GDP growth in the third quarter. Though it’s not possible to fully quantify the other effects of the Olympics, such as increased employment and a boost to the creative industries, it’s likely that these also had a positive effect on the figures.
The Queen’s Diamond Jubilee, on the other hand, depressed figures in June by cutting the number of working days resulting in a growth decline of 0.4%. As a result, growth this quarter could have been up to 0.5% higher due to a bounce back to a full complement of working days.
Though small businesses will hopefully be feeling more confident in light of these growth figures, it’s clear there’s still a long way to go to ensure growth becomes a positive trend rather than an anomaly.