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UK economy shows signs of life

Thursday, July 25, 2013 - 01:58

July 25 - Britain's economy is on the up, boosted by consumer spending and businesses, but as Joanne Nicholson reports it's still smaller than before the 2008-09 recession and there's little chance of an end to austerity.

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Britain's finance minister can finally say his plan to boost the bread and butter of UK's households is working. The economy grew by 0.6 percent in the three months to June - in line with market expectations and double the previous quarter. It will be a relief for George Osborne whose tough austerity programme has been heavily criticised. (SOUNDBITE) (English) GEORGE OSBORNE, UK FINANCE MINISTER, SAYING: "We're helping with the cost of living by taking people out of tax, increasing their tax free allowance, freezing the council tax, doing everything we can as part of our economic plan." The growth is largely down to consumer spending and a rise in construction. But NAB's Tom Vosa says the next six months will paint a more accurate picture. (SOUNDBITE) (English) TOM VOSA, HEAD OF MARKET ECONOMICS, EUROPE, NATIONAL AUSTRALIA BANK, SAYING: "Remember real wages are still negative so in real terms people are still losing money. That will constrain consumption growth and we worry that the 0.6 is more a reflection of PPI refunds being spent. When that starts to run out, the underlying outlook for consumption is still very soft." But feathers in the euro zone may be ruffled by the outlook. Britain's faring better than many of its European counterparts and even Germany - which provided the latest attraction in London's Trafalgar Square. Britain's financial services are a key part of the sector that's helping boost growth. And sustaining it is now the challenge. That means making the country more attractive to non-European investment. (SOUNDBITE) (English) TOM VOSA, HEAD OF MARKET ECONOMICS, EUROPE, NATIONAL AUSTRALIA BANK, SAYING: "The UK might be about a year ahead of the euro zone. The euro zone now looks as though it's in the stage where it's bumping along the bottom. I think Q2 will be slightly negative. It looks as though we could get positive growth in Q3." Britain continues to rely heavily on European markets - around half its exports go there. And there's plenty of work to do - its economy is still 3.3 percent smaller than before the financial crisis of 2008.

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UK economy shows signs of life

Thursday, July 25, 2013 - 01:58