Interview: City A.M. talks economics with Santander UK chief economist Barry Naisbitt

GDP growth slowed to 0.3 per cent in the first quarter. Is the UK economy losing momentum?

Growth at 0.3 per cent was a surprise relative to expectations, particularly expectations based on purchasing managers index surveys, retail sales and the like. We do know that GDP figures get revised, however. It seems to me that, if they are, growth is more likely to be revised up rather than down.

That said, it’s unlikely that we will get the same figure for growth each quarter. We should expect some variation. The key point is that growth is still positive, as it has been for nine consecutive quarters. There are also signs that the global trading environment is picking up.

Eurozone economies seem to be recovering, but the euro has also weakened against the pound. How will this affect exporters?

The Eurozone has been the upside surprise in the first quarter. My view is that different exporters in different sectors will be differently affected by the volume versus price argument [a growing Eurozone will buy more British goods and services, but a strong pound will make those goods and services less competitive in price terms]. Yes, sterling has strengthened against the euro, and that would suggest some negative pressures. But the fact that the Eurozone is starting to grow more positively, on balance, outweighs the negative effect for exporters. This won’t be true for all businesses, of course, but it is likely to be the aggregate effect.

How positive are you about the prospects for the UK economy?

Britain is in a period of recovery, and it’s a recovery that is relatively steady rather than spectacular. We’re still seeing economic growth – the first quarter may not have been as strong as we may have wished, but it was still economic growth.

The other positive that we perhaps haven’t seen come through yet is the fact that low inflation is starting to give us real earnings growth. In time, that should be seen to feed through into consumer spending growth. That, in turn, will be positive for businesses who are selling goods to consumers.

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