Britain's recovery gathers pace

published 1 May 2014

Britain's economy grew by 0.8% in the first quarter of 2014, a slight uptick from the previous three months' 0.7%, according to a preliminary estimate.

On an annual basis, growth was 3.1% higher than in the January-March period of 2013. That is the fastest year-on-year growth rate in six years, and means we are growing more quickly than any other G7 country.

Britain's national output is now just 0.6% below its pre-crisis peak, which should be surpassed by July. Industrial production and construction output remain 12% below the peak.

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Sterling rose on the news, climbing to its highest level since October 2008 on a trade-weighted basis. It is also at a five-year high againstthe dollar.

What the commentators said

And for the period between 1999 and 2010, the year-on-year gain has been revised up by an average of 0.5%, "by far the biggest upward revision bias" in the G7.

"Pity it took so long" to get back topeak, said Larry Elliott in The Guardian. The US economy reached this milestone three years ago. Still, at least "all the signs are" that the recent strong growth will continue.

There is expansion across the entire economy services, manufacturing and construction. Strip out oil and gas output, which has been declining for over a decade, and the economy would already be back to its 2008 level.

The rise in consumer spending, on which the recovery remains "heavily dependent", should also become more sustainable, said Capital Economics.

It has hitherto been fuelled by households saving less, but now that wages are rising and inflation is falling, real pay is on the rise, which should bolster confidence. Consumer confidence is already at an eight-year high.

Meanwhile, signs of improvement in business investment bode well for a pick-up in productivity. Expect growth of 3% this year and next: we are in a "Goldilocks scenario" of solid, but not excessive growth, which should allow both inflation and interest rates to stay low for some time.

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.