Following Wednesday’s Autumn statement, experts are warning George Osborne that he has little wriggle-room if the economy does not perform well in the coming months. Ratings agency Fitch has concerns that a rethink will be necessary now that the Chancellor has used an improvement in public finances to pay for a u-turn on tax credits. Fitch fears that should there be any under-performance, more austerity measures must be imposed, or the ambition to create a surplus in the economy by 2020.
A spokesman said:
Debt reduction is increasingly being driven by underlying growth and revenue trends, which could reverse (for example, if growth slows or revenue forecasts are revised back down).
The latest GDP growth report also shows how UK manufacturing has been struggling over the last year, partly due to a slowdown in emerging markets and the pound’s strength against the euro.
Much of the real growth is accounted for by growing consumer confidence, low interest rates and the consequent real-terms increase in household earnings.
Credit rating agency Standard & Poor recently stated that the UK has some of the worst trade deficit figures of any of the 129 countries it rates.
Worryingly too, GDP per person is now just 0.9% above its pre-crisis peak in the first quarter of 2008.
It will be interesting to see whether Osborne’s use of some rather fortuitous economic figures pays off, or whether confidence in the economy will once again drop in the new year.