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UK still on course for growth of at least 1 per cent in Q1, says IEA expert
Julian Jessop, Economics Fellow at free market think tank the Institute of Economic Affairs, commented on the GDP data, published yesterday by the ONS
“The UK growth figures for February were better than many seem to think, but the recovery faces multiple challenges in the months ahead. Now is a terrible time to be raising taxes and cutting the real value of benefits.
“The main point that people appear to have missed today is that, excluding NHS Test and Trace and the vaccine programme, UK GDP rose by 1.1 per cent in February. This was on top of a healthy 1.0 per cent increase in January.
“Even including the swings in health-related activity, the UK economy remains on course for growth of at least 1 per cent in the first quarter of the year. This would still be stronger than forecast by either the Bank of England (¾ per cent) or the OBR (½ per cent).
“The GDP data will not yet reflect the fallout from the war in Ukraine, or growing staff shortages due to Covid absences. But business surveys suggest that private sector activity remained strong in March and that UK firms are still relatively optimistic about the prospects for the next twelve months.
“The UK economy is also holding up better than most of the rest of Europe. Euro area growth is only likely to be 0-½ per cent in the first quarter. The UK has emerged sooner from the pandemic and is less exposed to Russia.
“The reduction in trade intensity (imports and exports) after Brexit, if sustained, is potentially a long-term negative. But in the short term it is at least reducing the vulnerability of the UK economy to external shocks.
“To be clear, the cost of living crisis will get worse before it gets better. The government needs to focus on growth, which is the best way to repair the public finances. Nonetheless, inflation is likely to fall back sharply later this year and the resilience of activity in the private sector should allow the UK to avoid a recession.”
Notes to editors
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