UK economy picking up speed
As investment rises and the global economy starts to recover, greater demand for UK exports will improve the local economy, economists say.
Growth that reached just 0.2 percent in the first three months of 2017 edged up to 0.3 percent in the second quarter of the year and will keep rising, according to the National Institute for Economic and Social Research (Nieser), who forecast 0.4 percent growth in the third and fourth quarters of 2017 and 0.5 percent in the first quarter of 2018.
Overall, the UK should grow by 1.7 percent this year, 1.9 percent next year, and 2 percent in 2019, analysts believe.
Rising export demand
Head of Nieser’s UK macroeconomics research Amit Kara said the “gentle increase” over the upcoming quarters will be due to rising export demand.
“If you look below the bonnet of our forecasts, consumer spending is no longer the engine of growth for the UK next year – the contribution shrinks to almost nothing. What is picking up is the contribution of exports, which is in large part because of our more optimistic view on the global economy including the eurozone, and also because of investment.”
Niesr’s upgraded its global growth forecast to 3.6 percent this year, better than the 3.3 percent predicted by the company back in May. The institute says that the UK’s growing economy - and the rising growth of the rest of the planet - means central banks need to make a start at bringing interest rates down to a more sustainable level.
Mr Kara said if the economy evolves as his firm has forecast, the Bank of England should withdraw stimulus - by raising interest rates - in the new year. This would involve raising interest rates to 0.5 percent, the level they were at before last August’s cut to .25 percent.
“We are not talking about a rapid return to higher interest rates, but signalling that process – even if it takes five to seven years – will help banks rebuild their balance sheets and create a healthier financial system,” he said.
Growth in the face of Brexit
Although a number of quarters are concerned that Brexit uncertainty is preventing companies from investing in property in London and the wider UK, stymying a return from low growth, foreign firms have in fact bought up big in the UK over the last year.
High profile purchases have been made throughout the last year, including last month’s £1.2 billion purchase of the iconic Walkie Talkie building in London. There have also been a number of under-the-radar purchases of factories and other commercial properties.