Economists say corporate investment and exports must overtake consumer spending

The Northern Echo: Spencer Dale, Bank of England chief economist Spencer Dale, Bank of England chief economist

THE UK's economic recovery risks running out of steam unless business picks up like household spending, experts have said.

Economists say corporate investment and exports must soon begin to overtake consumer spending as the main drivers of UK expansion.

They said the first-half of 2014 could prove critical amid concerns household spending is likely to come under threat from persistent low wages.

Newly-revised figures show the first three months of 2013 saw GDP rise by 0.5 per cent, improving to 0.8 per cent in the second quarter and 0.8 per cent again in the quarter.

The second dip since the start of the downturn in 2008 was revised away by official figures meaning there was neither a double dip or a triple dip.

In a recent speech, Bank of England chief economist Spencer Dale said the recovery to date had been largely on the household side, unsurprising since businesses would want to see a sustained pick-up in demand before having the confidence to expand.

He said: “The durability of the recovery will depend on the baton of growth being handed over to the corporate sector, whose spending and investment will help to foster stronger growth in productivity and real incomes.”

Samuel Tombs, UK economist at Capital Economics, said business investment was still below its pre-recession level.

He added: “We should be getting to the point in a typical recovery where we'd see business investment pick up at this stage, given how far it has fallen.

“There could be a weak period of a quarter or two if other parts of the economy don't pick up.”


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