After years of economic bad news, there might finally be some light at the end of the tunnel. New data and predictions from industry experts have shown that Britain’s economy could be starting to pick up.
Growing consumer confidence
One of the main issues with the economic downturn was the decline in consumer spending. As wages have dropped in real terms and unemployment levels have grown, consumers have been more inclined to keep hold of their money if they have been lucky enough to have any left. However, with more optimism has come a growing confidence amongst consumers to spend.
Analysts expect that wages will go up quicker than living costs before the end of the year, which is earlier than previously anticipated. When this happens, it will be the first time it has occurred since 2009.
The recovery is still heavily weighted towards the consumer, with their spending being responsible for more economic growth than exports. In 2013, there was a 2.4% increase in the amount consumers spent and just a 0.8% growth in export levels. This scenario needs to start changing if we are to see a true recovery from all sections of the economy.
Optimism amongst businesses
The British Chambers of Commerce (BCC) expects the UK economy will reach a higher level than it did in 2008, just before the start of the recession, by this summer. They anticipate that it will grow by 2.8% in 2014, which is higher than the initial estimates of 2.7%. They are also expecting a growth of 2.5% next year.
As the business recovery has got under way, we have seen more companies taking on new employees and looking to expand their reach or output levels. The Federation of Small Businesses (FSB) reports that one in seven businesses is looking to hire for new roles within three months.
The business world, however, knows that true growth can only come if we start to see a steady increase in the number of goods we export. Levels are on the rise, but not in the numbers that are required to sustain the economic growth in the long term. For exports to grow further, we first need the country to manufacture more goods that are desirable abroad. However, businesses are looking to the Government to invest more in this area, to try and kick start the export market.
As well as a lack of investment, the science and technology sectors are also suffering from a shortage of skilled workers. The right type of qualified graduates are failing to enter the market and often those that are employed in the industry are leaving the country to find higher quality jobs abroad. The industry needs to see the right levels of investment, in the same ways that other countries do. Otherwise, we will see more highly skilled employees heading overseas where their skills are more appreciated.
There are increasing numbers of encouraging signs showing that the economy is finally moving away from the problems of the economic downturn. However, for this growth to continue for a sustained period there needs to be a greater emphasis on exporting goods and less reliance on British consumers. If this situation was to occur, the UK economy could start to see the long term benefits.