Economic Deathwatch

Posted on: 28 February 2011 by Alexander Hay

A 0.6% drop doesn't bode well for our stricken economy

An increasingly fitting metaphor for our economy

At first glance, the economy seems to be doing well. Lloyds' Banking Group has reported pre-tax profits of over £2.1 billion, house-builder Barratt is reporting an upsurge in business, 800 steel making jobs have just been created in Teeside and British Gas' profits are soaring away...

Shame the rest of the economy isn't. High street sales are down by 12%. Water bills are going up by 4.6%. The average family is £9.00 poorer a week and the number of unemployed young people is estimated to rise to 1.2 million.

More ominously, recent events in Libya have potential to force up the price of petrol to £8.00 a gallon and threaten the recovery of the US economy, with implications for the rest of the world.

Elsewhere, fears of a second Dot Com bubble grow as Twitter, Facebook, Quora and others are valued at vast sums that may well be beyond their actual worth.

But most worrying of all is that our economy actually contracted by 0.6% in the last quarter of 2010. Some claim this in part was due to the heavy snowfall last year, but it seems unlikely that bad weather alone is to blame.

After all, the UK is full of people wary of the rise in VAT, who may be facing redundancy or pay cuts and already work some of the highest number of hours of unpaid overtime in the developed world. They're not spending, and for good reason.

Where does this leave the government? Its 'cuts at all costs' ideology may make things even worse as the UK's standard of living contracts and the public services needed to remedy this are unable to assist.

The recent fiasco caused by a lack of information and government inaction as British workers in Libya waited for evacuation suggest real issues regarding the government's competence in many areas. And is there any good news on the horizon? Sadly not. The future looks bleaker still.

Ten years ago, no one dared doubt our future prosperity. Who now dares to be optimistic? We had a Dot Com bubble back then too.

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Alexander Hay

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