UK economy grew by 0.7% during final quarter of 2013, says Office for National Statistics
The British economy grew by 0.7% during the final quarter of 2013, driven by soaring levels of business investment, the Office for National Statistics has identified.
The results are consistent with the previous forecasts made by the ONS in 2013 and are yet another positive piece of news after a year that saw the countryís economy pick up at a staggering pace in comparison from the year before.
Though the data also revised the UKís total growth in 2013 to 1.8%, down from the previous 1.9%, it is hugely important that the growth in the final quarter came from business investment, rather than from consumer spending, which has been the primary cause for the boom in the economy over the past 12 months.
This aspect of the ONSís data was met with praise by Howard Archer of IHS Global Insight, who identified:
ìEncouragingly, growth in the fourth quarter was much less dependent on consumer spending, with business investment seeing a sharp increase of 2.5pc quarter-quarter and 8.5% year-year. In fact, business investment was revised up markedly through 2013 to show four quarters of expansionî.
Whilst the success of boosting consumer spending power has been clearly indicated through the economic performance of the UK last year, it has nevertheless been questioned by politicians and economists alike whether this methodology for economic enhancement is viable for creating a ëfull and sustainableí economic recovery.
The biggest issue that has been highlighted with consumer spending as a mechanism to bolster the economy is that it is based on capital wealth, incurred through low interest rates, and is likely to drop down again when rates begin to climb up again.
However, whilst consumer spending only increased by 0.4% during the last quarter of the year, compared to a previous estimate of 0.6%, business investment was up 2,4%, which is substantially higher than the 1.3% forecast previously made by the ONS.
The news was met with praise by the Treasury, who argued that it clearly displayed the success of the current administrationís economic policies. However, they also identified that a great deal of work is still needed to be done in order to pick up labour productivity, consumer spending power, and import levels in the country.
ìIt's encouraging that business investment grew strongly in the fourth quarter and is now up by 8.7% on a year ago. The governmentís long term economic plan is working, but as the Chancellor said last week the recovery is not yet secureî, a statement read.
With business investment levels up a staggering 8.5% on year-year comparison, the Bank of England has forecasted substantial improvements in this area over the course of this year.
The BOE have argued that ensuring that business investment levels pick up is a priority at the moment, as it should finally impact labour productivity in the country, and ensure a balanced recovery, rather than the capital driven one that has been present in recent times.
This view was shared by Mr Archer who forecasted a positive 2014 for British consumers due to improved business investment levels.
ìGrowth on the domestic side of the economy is expected to be more balanced in 2014, with business investment making a markedly improved contribution. Consumer spending should be decent supported by high employment and gradually improving purchasing powerî, he said.
The news of the UKís credible economic performance over the course of 2013 will be a welcome boost to the Chancellor George Osborne, who is preparing for his annual budget on March 19.
In particular, the news of business investment levels soaring will be a significant boost, with the Chancellor embarking on a global campaign at present to encourage more financial institutions to set up stall and invest in the capital.
The Chancellor has previously highlighted the need for the country to pick up its manufacturing and export levels, arguing that real growth comes from more than just the economic power of London and consumer spending incurred through low interest rates.
In particular, the service sector in the UK is in need of reinvigoration, with a 0.8% rise indicated by official data from the final quarter of the year. Industrial output was up by 0.5%, whilst construction was up by just 0.2% during the same period.
It is due to this reality that investment levels are integral to the future success of Britainís economy, and encouraging foreign exports and picking up manufacturing levels are the best way to ensure that Britons begin to feel the real affects of the economy picking up.
The Treasury have pledged to continue focusing on improvement in this area, with a statement reading: ìThe Budget next month will do more to support investment and exports, and the biggest risk to the recovery would be abandoning the plan that's providing economic security for hardworking peopleî.