Official figures showed that Britain’s gross domestic product rose 1.2 per cent in the second quarter of this year, the strongest since 2001 – but economists warned that the rate of recovery has probably peaked. The figures prompted the British Chambers of Commerce to say it, too, had detected signs that the UK economy would grow faster than first thought this year.
The economic “good news” came after Deputy Prime Minister Nick Clegg was forced to defend the Liberal Democrat party against charges – prompted by the latest Institute for Fiscal Studies report – that it was being used as cover for a regressive, unfair Tory budget.
The IFS, in a report commissioned by the End Child Poverty campaign, said low income families with children are set to lose the most – about 5 per cent of net income – due to benefit cuts announced in George Osborne’s Budget. The IFS said cuts to items like housing benefit and disability allowance would cost the poorest approximately £422 between the Budget and April 2014. While other income groups will lose larger amounts in gross cash in terms of percentage of take home pay, the poorest 10 per cent will be hardest hit.
Meanwhile, the Bank of England said it may need to pump more liquidity and cash into the financial system and institutions. At the annual symposium for central bankers at Jackson Hole, Wyoming, Bank of England Deputy Governor Charles Bean suggested that the UK economy will need further “quantitative easing”.
Ben Bernanke, head of the US Federal Reserve, told the gathering that the economic outlook is “inherently uncertain” and said the economy “remains vulnerable to unexpected developments”.
Under Mr. Bernanke the Fed has been buying up US government securities to keep interest rates down to shield a precarious US housing market and ease pressure on personal debt as second quarter growth figures for the US were downgraded from an annual rate of 2.4 per cent to 1.6 per cent.
The British Chambers of Commerce raised its own 2010 forecast to 1.7 per cent growth from its earlier 1.3 per cent forecast. But it said that will be quickly followed by a sharp slowdown in growth at the start of 2011 as spending cuts and the VAT increase start to bite. It also predicted unemployment will increase over the next 18 months reaching a peak at about 2.65 million people of 8.3 per cent of the workforce.
At the same time the Centre for Economics and Business Research published research predicting that the UK job market will remain “extremely weak” over the next five years – it expects unemployment to reach above 10 per cent in the North, the Midlands, Wales and Northern Ireland.
