The Trades Union Congress (TUC) has suggested that growth in the UK economy is being adversely affected by an ‘avalanche of cuts’.
Preliminary estimates published by the Office for National Statistics (ONS) show that, between January and March 2018, growth in UK Gross Domestic Product (GDP) increased by just 0.1%, compared to growth of 0.4% in the previous quarter.
Although Chancellor Philip Hammond attributed some of the slow growth to the hazardous weather conditions that affected the UK in February and March, the ONS reported that this ultimately had ‘very little impact’ on the growth of the economy.
Drilling down into the various sectors that constitute GDP, the agricultural and construction sectors experienced falling growth, with these industries down by 1.4% and 3.3% when compared to the previous quarter. Meanwhile, production showed the highest growth at 0.7%. Finally, the services sector showed an increase of 0.3%, and proved to be the ‘largest contributor to GDP growth’.
The TUC believes that the pattern of low growth has been caused by ‘government cuts and underinvestment’. It claims that there is a need to modernise Britain’s infrastructure, and stated that this can be achieved by improving UK roads and railways, and by supplying high-speed broadband and ‘clean energy’ to ‘every part of Britain’.
Frances O’Grady, General Secretary of the TUC, said: ‘The government should set up a National Investment Bank to upgrade roads and rail.
‘And it’s time to get our public services back up to strength. Schools, hospitals and other vital services are part of Britain’s core economy. If they remain starved of resources, the rest of the economy will continue to struggle too.’
The Institute for Public Policy Research (IPPR) has proposed the creation of a new wealth fund to help address ‘growing wealth inequality’.
The ‘Citizens’ Wealth Fund’ would give everyone a ‘stake in the UK economy’, the IPPR stated.
It also said that, from 2030, the fund could be large enough to pay all individuals aged 25 a one-off capital dividend of £10,000, which would effectively provide a ‘universal minimum inheritance’ for all.
The IPPR suggested that the Citizens’ Wealth Fund would be owned and run in the interests of UK citizens, and could be worth £186 billion by 2029/30.
Commenting on the matter, Carys Roberts, Senior Economist at the IPPR, said: ‘Who owns wealth and who will inherit wealth is becoming more important – increasingly so as the share of national income paid to people through wages declines.
‘A Citizens’ Wealth Fund would enable citizens to collectively own a proportion of our national wealth, and make sure everyone benefits from rising returns to capital, not just people who will inherit or who already own assets.’
Business leaders’ confidence in the UK economy has ‘returned to positive figures’, and has risen to its highest level since Article 50 was triggered, a survey carried out by the Institute of Directors (IoD) has found.
The IoD’s poll of 700 company directors revealed that the balance of business leaders who stated that they are optimistic in regard to the UK economy has risen to 1%.
Directors’ confidence in their own businesses also rose, increasing to 47%, said the IoD.
However, the Institute warned that positivity is being ‘held back by labour shortages’, alongside the ‘burden of complying with government regulations’.
Commenting on the survey’s findings, Tej Parikh, Senior Economist at the IoD, said: ‘After nearly a year of economic pessimism winning out among business leaders, the scales have tipped gently into the positive.
‘It seems likely that meaningful progress in Brexit negotiations since December has brought some much-needed reassurance.
‘We urge the government to provide further detail on its proposals for the UK’s future trading and regulatory relationship with the EU, and to iron out its initiatives to narrow the skills gap and enhance business productivity through the Industrial Strategy.’
In a new report, the Confederation of British Industry (CBI) has warned the government that costs could rise for businesses if the UK were to diverge from EU regulations.
The report states that Brexit ‘presents opportunities for rule changes’ in specific sectors, which could ultimately benefit the UK economy.
However, the CBI also warned that the government should only diverge from EU rules if it can be proven that the benefits of doing so will outweigh the costs.
It said that, for certain industries, existing EU rules are ‘fundamental’ to the trade and transport of goods, and as such, remaining aligned with the EU would be ‘essential’.
Commenting on the issue, Carolyn Fairbairn, Director General of the CBI, said: ‘It’s vitally important that negotiators understand the complexity of rules and the effects that even the smallest of changes can have.
‘Deviation from rules in one sector will have a knock-on effect on businesses in others, and divergence from rules in one part of a production process will have consequences for market access throughout entire supply chains.’
The British Chambers of Commerce (BCC) has downgraded its economic forecast for the next three years, citing ‘sluggish’ business investment and household consumption.
In a new report, the business group downgraded its growth expectation for 2017 from 1.6% to 1.5%, and from 1.2% to 1.1% for 2018. Additionally, it now expects the UK economy to grow by 1.3% in 2019, a slight downgrade from its previous forecast of 1.4%.
The BCC also predicts that inflation will peak at 3% during the final quarter of this year, outpacing earnings until 2019.
It is urging the government to ‘fix the fundamentals’ of the UK economy over the coming year. The government must also look to ‘answer the practical questions’ in regard to Brexit and trade, in order to provide UK businesses with clarity, the BCC stated.
Commenting on the BCC’s forecasts, Dr Adam Marshall, its Director General, said: ‘Despite pockets of resilience and success, and strong results for some UK firms, the bigger picture is one of slow economic growth amid uncertain trading conditions.
‘Brexit uncertainty still lingers over business communities, and is undermining many firms’ investment decisions and confidence.
‘While the recent Budget made some welcome steps in the right direction, concerted and sustained action to fix the fundamentals is needed to encourage business investment and growth.’
Think tank the Resolution Foundation has suggested that the UK economy is on course for ‘the longest period of falling living standards since records began’.
In its post-Budget analysis, the Foundation stated that the current squeeze on incomes will last longer than the one that occurred following the 2008 recession.
The Resolution Foundation also stated that Chancellor Philip Hammond is faced with ‘grim economic forecasts’, following the recent publication of a fiscal and economic outlook by the Office for Budget Responsibility (OBR).
In its report, the OBR revised down its outlook for productivity growth, business investment and Gross Domestic Product (GDP) growth across the forecast period. It reduced its 2017 growth forecast from 2% to 1.5%, and predicted that growth will subsequently pick up to 1.6% by 2022.
Commenting on the Resolution Foundation’s analysis, Torsten Bell, its Director, said: ‘Faced with a grim economic backdrop, the Chancellor will see this Budget as a political success. But that would be cold comfort for Britain’s families given the bleak outlook it paints for their living standards.
‘Hopefully the OBR’s forecasts prove to be wrong because, while the first sentence of the Budget document reads ‘the United Kingdom has a bright future’, the brutal truth is: not on these forecasts it doesn’t.’
Meanwhile, commenting on the ‘grim forecasts’, the Chancellor stated: ‘The challenge for us as a nation is to prove them wrong.’