UK Growth – A Spring of Discontent?


The recent adjusted growth figures were poor – they confirm that the economy contracted in Q4 2010 even after allowing for the grim pre-Christmas weather.

Prospects for Q1 2011 are not exactly rosy. Weather aside, other negative factors have kicked in, including the hike in VAT to 20% and further job losses.

Confirmation of these negative High Street trends has been provided by both John Lewis – previously a beacon for rising year-on-year sales - and by the cut-price clothing chain, Primark; the latter’s sharp growth has undoubtedly been halted both by lower footfall and by rising cotton prices.

For UK plc, generating decent economic growth is crucial and will be central to the forthcoming Budget. Expect a raft of measures bearing the ‘with growth’ tag on 23rd March.

The difference over a five-year period between 1% growth and 3% growth per year is colossal in terms of curbing the UK’s £1 trillion net debt. If growth remains sluggish, further public spending cuts may be needed.

Undoubtedly, it will be the private sector – not the public sector – that will need to deliver the necessary growth by expanding in competitive markets.

Over the next few weeks, two particular sectors will be hoping to benefit from spring’s arrival.

The bombed-out private house-builders will be expecting many potential buyers around their sites. Whilst their propositions may prove popular, they have one major problem – how do potential house-buyers secure the requisite mortgage?

Whilst loan-to-value figures are rising, many mortgage applicants remain disappointed. Of course, the last thing required is the return to the ludicrous 125% Together products that brought down Northern Rock and presaged the UK bank crisis.

DIY companies, such as B and Q, will also welcome good weather and crushed shopping aisles in the lead-up to the crucial Easter period.

UK growth at the crossroads?