UK economy

Pessimism dies hard in the UK. Even so, the startling rise in sentiment in UK business surveys in recent months calls for a rethink of the downbeat view of the British economy which prevailed almost everywhere at the start of 2013. After several years of gloomy economic data, there was a strong consensus that the UK was permanently mired in a severe demand shortfall, and that none of the usual levers – monetary policy, fiscal policy or weaker sterling – were ready or able to remedy the problem.

The outlook appeared so bleak that the government imported Mark Carney from Canada to devise emergency ways of easing monetary conditions.

By the time that Mr Carney took office as governor of the Bank of England in July, however, the economy had already embarked on a completely unexpected recovery. According to Fulcrum Asset Management’s statistical system, which tracks all of the available data sources and combines them into a single composite indicator of activity, economic growth in the third quarter is running at an annualised rate of 4.5 per cent, the highest rate seen since the booms of the 2000s and the 1980s. Read more

The sterling exchange rate has now declined by about 7 per cent this year, thus eliminating all of the rise which occurred when the euro crisis was in full flood in 2011-12. Investors are asking three main questions about the drop in sterling. When will it end? Will it succeed in boosting UK economic growth? And could it, conceivably, lead to a full blown sterling crisis? Read more