Economy slows as jobless total rises
UK remains the second-worst performer among G7 nations
BRITAIN is set to grow slower this year than previously thought, remaining the second-worst performer in the G7, new forecasts have suggested.
Projections by the International Monetary Fund (IMF) found that the global economy has been “remarkably resilient” over the past two years but the conflict in the Middle East could see food and energy prices rise across the world as they did with the Ukraine war.
It expects gross domestic product (GDP) in the UK to hit 0.5 per cent this year, a slight downgrade from the 0.6 per cent growth it had forecast in January.
This would keep the UK the second weakest performer across the G7 group of advanced economies, behind Germany which is set to see growth of just 0.2 per cent.
Britain is set to lag behind other countries such as France, Italy, Japan and the US, though growth is set to improve next year where the body suggests that the UK will sit among the top three best performing economies in the group.
It also expects 2025 to see the UK’s inflation level reach the Bank of England’s two per cent target.
A spokesperson for HM Treasury said: “The forecast for growth in the medium term is optimistic, but like all our peers, the UK’s growth in the short term has been impacted by higher interest rates, with Germany, France and Italy all experiencing larger downgrades than the UK.”
Yesterday, the incoming deputy governor of the Bank of England rejected calls for the UK’s fiscal watchdog to be scrapped.
It came after former Prime Minister Liz Truss said Bank of England Governor Andrew Bailey should resign over his response to the 2022 mini-Budget which triggered market turmoil, and said she wants to “see the back” of the OBR (Office for Budget Responsibility) watchdog.
Clare Lombardelli told MPs on Parliament’s Treasury Select Committee that she believes there is “widespread support” for the structure of the Bank of England and the Governor.
She also provided her backing to the OBR, the Government’s official forecaster, describing herself as a “big fan” of the institution, having seen its economic assessments while working in the Treasury.
It comes as Britain’s unemployment rate rose by more than expected as earning growth eased back, in another sign of the economic uncertainty in the UK’s job market.
The Office for National Statistics (ONS) said the jobless rate jumped to 4.2 per cent in the three months to February – the highest level for nearly six months and up from 3.9 per cent in the three months to January.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said: “There is solid evidence the labour market slowed markedly in March.”
THE IMF expects the UK to eke out slower growth this year than previously thought and remain the second-worst performer in the G7 group of advanced economies.
These forecasts paint a worrying picture and show the desperate need for growth. It is why the Shadow Chancellor Rachel Reeves is trying to make economic growth the central tenet of Labour’s pitch to voters. Even the Tory Party knows that Britain has been hampered by anaemic growth. It’s mainly a question of how Britain goes about achieving said growth.
Rather than a race to the bottom, what the country needs is sustainable growth that safeguards standards while creating meaningful employment opportunities that will last for many years to come.
It is also about the distribution of opportunity. Only true devolution both political and fiscal can really deliver growth that Britain needs.
The report by Centre for Cities highlights how the Government’s current approach to levelling up is stifling the very regions the agenda is meant to help.
The approach to providing local areas with much needed funding is fundamentally flawed. It is far too fragmented with a propensity to favour so-called shovel-ready projects. Projects that aren’t always best for long-term growth. This also makes it difficult for local authorities to create joined-up strategies for the benefit of their areas. Other issues are also highlighted by the think tank, such as moving goalposts, which discourages evidence use in local government.
Economic inactivity due to sickness is at its highest since records began. This only adds impetus to the need for greater devolution. A healthy economy makes for better health outcomes.
The escalation of conflict in the Middle East risks pushing up food and energy prices across the world. That’s why economic growth is all the more important.