Economic growth to be welcomed but Britain faces stormy conditions
In an era of widespread global uncertainty, Britain’s higher-than-expected growth is to be welcomed. Gross domestic product (GDP) increased by 0.3 per cent in March, a surprise uplift for the first full month after the start of the US-Israeli conflict with Iran. This helped the economy grow by a higher-than-expected 0.6 per cent over the first quarter, between January and March.
It is the highest growth amongst G7 countries that have released GDP figures for this period. Every and any crumb of comfort will naturally be seized given the global economic picture.
However, that does not mean Britain is out of the woods.
The warning from economists that the pace of growth is set to stall throughout the year as the impact of the Iran war begins to show is a reality check.
If anything, these figures may have been skewed by “front loading”, according to the Office for National Statistics (ONS). It suggests that activity was being brought forward ahead of anticipated shortages in supply or price increases.
Given the backdrop of uncertainty, the Chancellor is right to warn against risks to financial stability in the UK. A potential leadership challenge would lead to political paralysis that the economy cannot afford.
The recent increase in the cost of government borrowing is a reminder of the economic cost of heaping uncertainty on top of uncertainty.
The Government needs to focus on the choppy economic water ahead. The true cost of the war in the Middle East has not filtered through yet. When it does, some tough decisions are going to have to be made.