UK economy is slowly climbing out of recession

Amid recent gloomy economic news emanating from UK, the latest reports from the Confederation of British Industry (CBI) and the Office of National Statistics (ONS) suggest that the economy will turn around during the next year.

The CBI's first economic report published in 2002 stated that the economy's annual growth rate may slow to 1.8 per cent in 2002, compared with 2.4 per cent last year. However, as the UK works its way out of the tail end of the downturn, economic growth for 2003 is expected to top 2.7 per cent.

CBI Deputy Director-General, John Cridland, said: "The UK economy is giving a good account of itself during a tough global slowdown. Although consumer spending is expected to weaken later this year, it should be compensated by stronger export growth as the international economy comes out of recession."

Exporters are predicted to increase trade, with export volume forecasted to average 1.6 per cent for the year, compared with 0.9 per cent in 2001. Imports will continue to show positive growth as a reflection of the improved consumer confidence and an upturn in government investment. As a result of this, inflation pressures that many analysts had predicted would lead to interest rate rises at the start of February.

The CBI have based their report on the premise that interest rates do not exceed 4.25 per cent by the end of this year and 5 per cent by the end of 2003. The Governor of the Bank of England, Sir Eddie George, suggested as much when he recently hinted that there would be no alteration to the rate – saying that futures markets would be wrong to expect an interest rate rise.

In comparison to the eurozone, the UK registered by far the largest trade deficit posting a record of £33.6 billion – a significant jump on the previous year's £30 billion deficit.

A CBI spokesman felt that this was a reflection of a struggling export industry competing in a climate of strengthening imports and against a weak euro.

"Manufacturers clearly had a very tough year. Exporters have been forced to cut prices to the bone just to keep hold of their customers overseas," the spokesman said.

(GMcG)