Economy sluggish in second quarter

THE UK economy grew by 0.2% in the second quarter, according to figures released this morning.

The latest figure means the economy has largely been flat since September last year with GDP shrinking by 0.5% in the last quarter of 2010 and growing by the same figure in the first three months of 2011.

It will put Chancellor George Osborne under renewed pressure to defend the Coalition Government’s plans for growth and the speed and extent of its cuts in public spending.

The weekend saw Business Secretary Vince Cable call for the Bank of England to expand its quantitative easing programme in an effort to stimulate greater demand.

In reaction, West Midland business leaders stressed the need for more investment in the region.

Ross Gurdin, policy advisor at Birmingham Chamber of Commerce Group said the high speed rail link, while not a short term solution would help to boost the economic recovery, but the Government needed to invest more in short term projects.

“CPI inflation currently at 4.2% has eaten into household budgets as wage settlements, largely below the rate of inflation, mean that households have less disposable income.  Retailers have been forced to begin their summer sales earlier and are offering bargain-basement prices in an effort to remain competitive. 

“Add to that the Japanese earthquake which disrupted manufacturing supply chains, a raft of bank holidays around Easter and high fuel and utility costs and you have an extremely challenging market for businesses in the UK.”    

He said HS2 would create 22,000 jobs in the West Midlands and boost the regional economy by £1.5bn a year.

“But it is a long term prospect,” he added. “The Government needs to invest more in short term projects.”

Ian McCafferty, the CBI’s chief economic adviser, said: “This is the third consecutive quarter in which special factors, such as the winter weather, unseasonal North Sea maintenance, the Japanese tsunami and an extra bank holiday, have made interpretation of the data more difficult and have depressed economic activity over the short term.

“There is likely to be some bounce back over the autumn, but it’s clear that the underlying economic recovery remains fragile and difficult.”