Rejoice, just rejoice. Britain is back out of recession. On the figures released yesterday – pre-empted by a loose-tongued Cameron – the whole economy grew by a mighty single percentage point over the summer months. It is now back to the size it was this time last year.
Without wishing to spoil what must undoubtedly be wild celebrations, there are three things to note. First, the figures have been boosted by a combination of a rebound from the Jubilee bank holiday and Olympics. Both together have added something around 0.5% to growth for the quarter. There is a wonderful irony in seeing George Osborne, a man otherwise noisily convinced of the merits of unfettered capitalism, clinging for all he’s worth to the economic boost provided by a mighty public spending scheme in Stratford. That, alas, is unlikely to be repeated any time soon.
Second, most of us would be forgiven for failing to notice much in the way of prosperity. Average real household incomes have fallen every year for three years, and are set to fall by a further 0.2% this year. The boom of the 2000s produced stagnant real incomes for most of us; the subsequent slump has dragged most of us downwards.
Third, there are no convincing signs of a sustained recovery. Profit warnings by companies over the last three months hit their highest levels since 2008. The trade deficit – the gap between what we import, and what we export – has reached all-time highs over the summer, while the UK’s biggest export market, the Eurozone, continues to flounder. Perhaps most ominously of all, the Bank of England reports that underlying motor for growth – rising productivity – is, having crashed over 2009, failing to restart as it should, thanks, in the main, to our heavy dependence on the service sector.
Whatever their crowing this week, this was not the script Osborne or Cameron wrote on election. If you want a good – if hollow – laugh, dig out the Office for Budget Responsibility’s June 2010 forecasts, made shortly after the Coalition government was formed. Business investment should be booming by nearly 10% this year: in reality, it has grown less than 1%. British exports should flooding the world’s markets. And the whole economy should have grown by 5.7% under Osborne: the reality, 0.6%
Austerity continues to cripple real recovery and is set to accelerate over the next two years. Deep-seated weaknesses in the UK economy are starting to make their presence felt. Without a major and sustained shift – really, a complete reversal – of current government policy, there is no reason to expect a sustained improvement in the outlook for most of us. Cameron may find himself with rather less to brag about ahead of the next set of GDP figures in January.