Growth forecast hiked for UK as recovery emerges

THE BRITISH economy is expected to expand almost twice as quickly this year as previously thought, according to new forecasts from a major international agency.

According to the Organisation for Economic Co-operation and Development (OECD), the UK’s GDP is likely to grow by 1.5 per cent this year, up from the 0.8 per cent it had previously predicted.

The UK was one of the developed economies noted for showing “encouraging rates” of activity, along with Japan and the US, while growth in emerging countries has been more sluggish.

Recent data in the UK has pointed towards robust growth in the third quarter, with strong readings in surveys for the manufacturing, construction and services sectors. The OECD also cited recent changes to housing policy in the UK as a positive effect on growth expectations.

Neil Williams, chief economist for Hermes Fund Managers commented on the situation: “It’s a slow grind, with the UK and Eurozone half way to a lost decade. Middle east tension offers extra support to relative safe havens, such as UK gilts”

Capital Economics’ assessment of the UK’s regional economies highlighted that even with GDP growth, some parts of the UK are still experiencing painful conditions.

Outside of London, Bristol’s house prices rose at the quickest rate of any city, up by 2.9 per cent in the year to August, but in Liverpool they are down by 4.3 per cent over the same period.

Despite the positive assessment of the UK and other developed countries, the OECD cautioned that issues in the developing world would have a global impact: “As emerging economies contributed strongly to economic dynamism in recent years, this slowdown makes for a continuation of sluggish global growth, notwithstanding the pick-up in advanced economies.”

Many emerging economies have been hit hard over the past month, as investors begin to expect the withdrawal of some of the monetary support from quantitative easing in the US: “Global bond yields have led to significant market instability, rising financing costs, capital outflows and currency depreciations”.