UK Economic Update

The buzz around London is beginning to fade following the completion of the London 2012 Olympic games. Many are predicting a post Olympic slump in the UK economy. The UK is also facing inflationary pressure from rising fuel and energy prices. Electricity providers recently proposed a 10% increase in the UK. The Bank of England (BOE) continues to adopt a wait-and-see approach before taking any action. The BOE has signalled that no further quantitative easing is planned although many economists believe this is inevitable. Any further money printing will fuel inflation have a negative effect on savers. 

July public borrowing figures revealed a deficit of £600m. The British economy has struggled in the second quarter as the record wet weather and extra days public holiday for the Queen’s Jubilee reduced output. The construction and manufacturing sectors were amongst the hardest hit. UK house prices have reduced to their lowest levels since 2009 with the exception of London where house prices remained stagnant. The Bank of England has cut the UK's predicted economic growth forecast, indicating that there will be no growth to the economy in 2012. 

The continued recession in the UK has led to a reduction in tax receipts combined with an increase in government spending. This means that the UK government debt actually increased in July despite George Osborne’s attempts at austerity. Once again, the UK government will need to explore areas of growth within the stagnating UK economy.