Business investment lifts economic outlook for UK
BRITISH companies ramped up investment spending at the end of last year, spurred on by an improving economic outlook.
The Office for National Statistics (ONS) released its second estimate of fourth quarter growth yesterday, keeping it unchanged at 0.7 per cent – yet the new figures suggested a healthy balance among the factors contributing to the recovery.
Business investment jumped by 2.4 per cent in the quarter, going some way to dispelling economists’ fears that UK growth has been driven excessively by consumer spending.
Investment by firms climbed in all four quarters of last year, the latest ONS estimates show, including a two per cent rise in the third quarter.
“Companies have weathered a prolonged period of uncertainty,” commented EY economist Mark Gregory. “Having warehoused cash for a number of years, and with ready access to credit, leading UK corporates now have more confidence to pull the trigger – and this is evidenced in the positive GDP figures highlighting sustained business investment.”
The service sector, which makes up around three quarters of output in the UK, is now 1.3 per cent above the peak it achieved prior to the 2008 recession. Business services and finance contributed the sharpest growth in the fourth quarter, growing 1.4 per cent.
Overall the economy grew by 1.8 per cent last year, slightly down from the statistics office’s initial estimate of 1.9 per cent growth.
The official figures coincided with a bullish survey from the private sector. The Confederation of British Industry’s (CBI) latest growth indicator struck the highest level since it began in 2003, the group said.
“The surge in confidence among firms for the next quarter suggests the recovery will continue to gain traction,” said the CBI’s Katja Hall.
A positive balance of 41 per cent of surveyed companies expect output to grow in the next three months, the CBI figures showed.