What are the risks to the UK economy from a recovery?
As we covered in one of our earlier posts, inflation figures released today have confounded critics who believed that the UK economy will still in recession. Many analysts have been forecasting further falls in inflation although the CPI and the RPI figures were nowhere near as bad as forecast. While many people will now be cheered by the fact the UK appears to be pulling away from recession there are still significant problems ahead.
Let's not forget that over the last 18 months the UK government has managed to rack up debts of over £1 trillion, tax increases are certain to follow, unemployment has not yet peaked, businesses are still going to the wall and more and more consumers are looking towards IVAs, trust deeds and bankruptcy as a way out of their own financial troubles. It seems more and more that the UK economy has moved into recovery mode, although we need to see a number of positive months before this is confirmed, and inflation may be a problem in the short term.
If the recovery in the economy is sharper and quicker than the Bank of England and the government is expecting then interest rates may lag behind a rise in the rate of inflation and subsequently we could move away from a deflationary risk to an inflationary risk.
Share this..
Related stories
Bank unveils rights issue plans
Barclays is to sell £4.5 billion of new shares in order to improve its balance sheet.The bank revealed today that overseas investors would take up the bulk of the stock offer, known in the industry as a "rights issue".According to the bank's chief executive, John Varley, the extra revenue created by the sale would allow Barclays to offset losses from the credit crunch and acquire new businesses i...
Read MoreUK car industry takes another body blow
On the surface, the move to consolidate Jaguars manufacturing capacity in the UK by a closing one factory over the next few years would seem little to be concerned about, with no job losses expected, the unions say it is actually a major issue. It is not certain as yet which of the Jaguar manufacturing plants will be closed although it is certain the plant will be located in the West Midlands, the...
Read MoreRoyal Bank of Scotland part of Kraft Foods finance team
It has been revealed that state-owned Royal Bank of Scotland is part of the Kraft Foods finance team putting together funding for a potential £10.2 billion bid for Cadbury. While the informal offer was made some time ago, there are rumours in the market that Kraft Foods could go hostile over the next few days as well as talk that Unilever may be about to enter the bidding with an £8.50 a share o...
Read MoreHas consumer confidence bottomed out?
News that consumer confidence appears to have picked up over the last month has been assumed by many to signal the end of the consumer confidence crisis. However, the consumer confidence figures reflect the views by many that now is the time to make a substantial purchase but confidence about the economy and the outlook for next year is still falling. Whether consumers are now wrapped up in the fe...
Read More2014 could put many homes out of reach for buyers
16/12/2013 It is expected during 2014 that house prices could increase by 8%, which would push the average house price above £250,000. According to the property website Rightmove this increase is said to be caused by a combination of growing confidence in the housing market and the lack of supply of homes coming onto the market. The average British home will cost a buyer between £250,000...
Read More