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Professor Geraint Johnes

GDP passes 2008 peak but growth will be lower in 2015

Authors: Professor Geraint Johnes Director

25 July 2014

Commenting on today's GDP figures, Geraint Johnes, director at Lancaster University’s Work Foundation, said: 

“The second quarter estimate of Gross Domestic Product indicates continued healthy growth of the UK economy. Compared with the second quarter of last year, output is up by 3.2 per cent; compared with the first quarter of this year, output has risen by 0.8% - the annual equivalent of this is 3.2 per cent which suggests that the growth rate is now reaching a peak.

“There are encouraging signs in the pattern of growth across industries. After a long period in the doldrums, some important service sectors are starting to pick up - notably distribution and hospitality (4.8 per cent growth over the year), transport and communication (2.2 per cent) and business/financial services (4.1 per cent). After an encouraging first quarter, manufacturing has slipped back a little, but year-on-year growth in this sector remains at 3.2 per cent.

“All of the above is unequivocally good news. But since the Great Recession we have come to learn that strange is the new normal. The recovery in output is welcome, and the fact that it has now passed the peak achieved in 2008 is worth at least some celebration. But much of the recovery has been due to an increase in the economically active population - per capita growth has remained well below par. Nevertheless, unemployment rates have fallen, and (at least in manufacturing, in parts of which real wages have started to rise) skills shortages are starting to emerge. Yet elsewhere - with the sharp rise in self-employment and the continued presence of substantial underemployment, with workers working fewer hours than they would like - there appears to remain plenty of spare capacity. This is all indicative of a big shift in the structure of the economy - in the types of work that we are best equipped to be doing - and enabling people to adapt to that shift will make demands on our systems of training and skills development.

“What do the figures say about the effectiveness of austerity and the management of the economy? The Chancellor's actions trump his rhetoric. Austerity was effectively abandoned a couple of years ago, and the economy has flourished - albeit in patches - since.
  
“Nevertheless, the recovery has still not been consolidated; the UK cannot grow in isolation, and growth in many of our major export markets remains fragile. The best guess for 2015 is that growth will be lower than the rather remarkable results that are being achieved in the current year.”


Ends

Notes to editors

1. Geraint Johnes, director, and Ian Brinkley, chief economist, are both available for interviews, briefings and written comment.
2. The Bell-Blanchflower index on underemployment is available on The Work Foundation’s website - http://www.theworkfoundation.com/Datalab/The-BellBlanchflower-Underemployment-Index
3. Lancaster University’s Work Foundation transforms people’s experience of work and the labour market through high quality applied research that empowers individuals and influences public policies and organisational practices. The Work Foundation is part of Lancaster University – an alliance that enables both organisations to further enhance their impact. 


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