UK growth spurt ‘too good to be true’
The UK economy’s growth spurt is “too good to be true”, analysts have warned, as economists said Rachel Reeves should intervene on the country’s energy policy.
ING’s James Smith said the latest data showing a 0.5 per cent jump in growth was consistent with trends seen over recent years where the UK economy has fired up in early parts of the year before fizzling out.
“If it sounds too good to be true, then it probably isn’t,” Smith said.
He said the surprise result for Reeves followed “a trend which dates back to 2022, where growth has tended to come in much stronger in the first quarter than over the rest of the year”.
“Most of the latest surge, we suspect, is noise. Suffice to say, all of this is old news anyway, given the crisis we find ourselves in today,” he added.
Economists warned that the Iran war in March would put growth plans under jeopardy as the energy price shock from trade disruption would test businesses and weaken demand among consumers.
Labour urged to act on growth
Martin Beck, a former Treasury economist now at WPI Strategy, said the latest figures were the “calm before the storm” as growth in the first quarter of the year is set to be dragged down by more worrying figures to be published next month.
But he said Reeves and other cabinet ministers could intervene to further secure the UK economy from the price shock over the long term, offering investors a better view of growth plans.
Beck said: “It used to be said that a conservative is a liberal who has been mugged. Something similar could now happen in UK energy policy: the recent shock could accelerate a shift from idealism to realism.
“In a world of more volatile geopolitics and fragile supply chains, the case for maximising domestic energy production, including from the North Sea, becomes less ideological and more economic.
“The question is whether UK policymakers are prepared to act on that, or instead remain committed to an idealistic energy policy which is becoming ever harder to square with the ‘cruel real world’.”
Reeves spars with Miliband
Debates over oil extraction in the North Sea have divided the government as energy secretary Ed Miliband has not yet given the green light to oil and gas projects at Rosebank and Jackdaw.
Reeves offered her support to the two sites, claiming they would “create jobs and revenue”.
“We said in our manifesto we would honour existing licences but the courts overturned the previous government’s decision.”
Labour donor Dale Vince hit back at the Chancellor, claiming approval of the sites would amount to a “betrayal”.