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Today, the news that the UK had finally shown economical growth of one per cent and, hence, exited a recession was announced.
It is pleasing news to the country, and the Government and the media are spinning into brilliance; yet I am sceptical. Now I know I’m not an economist but I can offer a short outsider’s perspective on this item. I offer caution and definitely think it’s no time for celebration yet.
First, and foremost, we must recognise that the quarter that has shown growth encompassed the Olympic period. The mixture of tourism, hospitality and sporting fever practically guaranteed that there would be no financial downturn over the three months from July to September; there were millions of people touring the city of London, an expensive place to be on the quietest of the day, and heightened prices (particularly within the Olympic park itself) for the events will more than definitely have seen a rise in profits amongst the companies. But, this is a onetime event; the aftermath of the Olympics is already over. In fact, if you’re like me, I’d not thought about the Olympics at all for a while until this announcement. Despite the fact that it’s only been announced that 0.2% of that is from the Olympic tickets, I’m sure the majority of this income is from the Olympics and it’s not something that will be repeated. So don’t hold your breath for massive growth in the next quarter.
Next, the Government is still announcing and planning further and further cuts that will have huge impacts on the incomes and budgets of households across the country. Hence, there will be little money to spend. People’s bank accounts are already squeezed enough as it is without having to deal with a reduction in funding. With no internationals and no sporting events on, people will not spend anything other than on the basics, especially whilst having to save for Christmas.
And that’s the final point. We are unlikely to see an immediate drop in growth next quarter, as Christmas will undoubtedly have some increased spending (on those tight budgets) that will cause some small amount of growth. But this will all cause a feeling of false hope; the Government and the media will spin it to say it’s a good thing and something to congratulate the Government on, but in reality, they have done little. The Olympic project was set up under the Labour Government; this, plus the spending, was not a result of their policies, but the result of international and national patriotism and celebration.
I warn you, we will be back in a recession before long – unless, by chance, this happens to be the kick up the backside that the economy needs.