Stronger UK recovery boosts Brown’s election hopes

Stronger UK recovery boosts Brown’s election hopes
# 26 February 2010 18:42 (UTC +04:00)
Baku – APA. Britain’s rise from recession was stronger than previously thought, giving Prime Minister Gordon Brown’s governing Labour Party a boost as it moves toward a national election, APA reports quoting Associated Press.
Friday’s revision of growth in the final quarter of 2009 to 0.3 percent from an initial estimate of 0.1 percent assuaged fears that the country hadn’t exited from its recession, but economists warned the improvement remains shaky.
Third quarter gross domestic product was revised downward to a 0.3 percent fall from a 0.2 percent decline, and measures that had boosted the final quarter’s figure, such as a break on sales tax and a car scrappage program, ended at the start of this year.
Some experts suggested Brown will want to move quickly to capitalize on what might be just a temporary upswing and take advantage of a recent gain in opinion polls on the leading opposition Conservative Party.
"With consumer confidence rising and the Tory poll lead narrowing, Mr. Brown must be tempted to hold a snap election next month," said Royal London Asset Management economist Ian Kernohan.
Brown, who has been defending attacks on his character in recent days after a book by a political journalist painted him as angry and abusive to staff, has to call an election by the start of June.
Viewed early in the global economic crisis as a decisive leader on the world stage and at home, many analysts believe he squandered an opportunity to call an early election in the summer of 2008.
His stock has fallen since then, along with the British economy’s prospects, allowing the Conservative Party to pull ahead in the polls.
But the latest Ipsos Mori poll for the Telegraph newspaper, published Friday, puts the Conservatives at 37 percent, just five percentage points ahead of Labour — a drastic pullback from the 19 point lead recorded around this time last year.
Asked about Brown’s plans for an election, his spokesman Simon Lewis said Friday that the leader "doesn’t have any audiences with the queen planned for the weekend, I can assure you of that." In order to call an election, Brown must ask the Queen Elizabeth II to formally suspend Parliament — though on previous occasions leaders have announced the date of a national election before visiting Buckingham Palace.
Friday’s GDP figures — a third and final revision is due at the end of next month — suggest the window of opportunity for Brown may be small.
Upward revisions in growth in the powerhouse services sector — which accounts for 75 percent of output — production industries and household spending were ranged against a fall in investment and a rise in imports that outweighed exports.
"The return to positive growth was driven primarily by a slowdown in the rate of inventory unwinding, hardly the basis of a strong recovery," said Capital Economics economist Jonathan Loynes. "Overall, the upward revision is welcome, but does not alter the picture of a very fragile recovery."
Revisions to previous quarters’ growth also revealed that the downturn was the deepest on record, showing a 6.2 percent peak-to-trough slump. That exceeded the 6 percent fall recorded 30 years ago during the government of Conservative Party Prime Minister Margaret Thatcher.
Most economists expect Britain to struggle to grow 1 percent this year — a sharp contrast to the International Monetary Fund forecasts of world growth of 4 percent and U.S. growth of 2.7 percent.
The British government’s own forecast is for 1-1.5 percent growth, but Brown’s Treasury chief Alistair Darling remains publicly cautious.
"What the figures show is that the economy is recovering; they’re welcome figures," he said. "But if you look at the other indicators around, whether it’s in Europe or America ... you can see there’s a lot of uncertainty."
George Osborne, the Conservatives’ spokesman on the economy, said the figures supported his plan to move quickly to cut spending and reduce the ballooning budget deficit, if his party wins power.
"It strengthens the Conservative argument that we now have to make a start on dealing with the debts that Gordon Brown has run up," he said. "That is how we will bring back confidence to the economy and deliver a proper, sustainable, job-creating recovery."
The size of the deficit, expected to reach 13 percent of GDP this year, has been a major point of difference between the two parties, with the government arguing that it is too early to trim spending and risk a nascent recovery.
"To remove support from the economy, as the Conservatives are suggesting, would be to risk derailing that recovery and risk tipping us back into recession," Darling said Friday.
Britain is the last major economy to return to growth after the global credit squeeze. It was hit particularly hard because of its huge banking and financial services sector, which had to be propped up by the government’s multibillion-pound bailout, as well as higher levels of personal debt and, like the U.S., a collapsed real estate bubble.
The fallout cost the country 100 billion pounds ($160 billion) in lost output. Some 1.3 million people were laid off, unemployment rose as high as 7.9 percent and around 50,000 families had their homes repossessed.
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