UK economy resumes growth, budget deficit threatens reform process

Economic Growth U.K. Data released by the UK National Statistics Office on Thursday showed that the economy grew 0.4% month-on-month in May, compared with expectations for a 0.2% increase.

he came growing up back economic recession Britain's economy fell sharply in April, which is good news for the new Labour-led government, which has made restoring growth one of its priorities.

Commenting on the growth, the UK's new finance minister, Rachel Reeves, said: “Achieving economic growth is our national mission and we have no time to waste,” stressing that the country should start rebuilding.

Reeves, a member of Keir Starmer's government and leader of the center-left Labour Party, which won last week's general election, announced the creation of a “national sovereign fund” into which she will inject 7.3 billion pounds ($9.4 billion) over five years.

Expected deficit

In related context, Bloomberg reports that Reeves faces the possibility of… Weakness As much as 30 billion pounds ($39 billion) in the budget could hamper Britain's new government's ability to fix the country's crumbling public services.

Bloomberg cited private sector economists as saying that the UK Office for Budget Responsibility (OBR) – considered the mastermind of the budget – is too optimistic about the next two years and that any boost to growth from Labour policies could be eliminated by cutting… Credit Rating.

While the Office of Budget Control projects economic growth of 1.9% in 2025, the average forecast of 56 economists surveyed by Bloomberg is only 1.3%.

Robert Wood, chief UK economist at Pantheon Macroeconomics, told Bloomberg that any boost to growth from government policies such as housing construction or small changes in trading relations with the European Union could explain the OBR’s upbeat outlook.

These warnings reveal vulnerabilities public finance The New Labour government is trying to stimulate economic growth to get more money to fund dilapidated frontline services, according to Bloomberg.

Piles of British pound notes are seen at the headquarters of GSA Austria (Gross Currency Services Austria) in Vienna July 22, 2013. REUTERS/Leonhard Foeger/File Photo
Warning of a gross UK budget deficit (Reuters)

Borrowing or taxation

Labour is hoping to build on Britain's remarkable rebound from recession last year, with new data on Thursday showing the economy grew twice as fast as expected in May, putting the country on track for another strong expansion in the second quarter.

Although the Prime Minister was excluded Keir Starmer To return to austerity, his government would need to borrow more, raise taxes or boost growth to ease spending cuts enacted by the previous government if it wants to stick to its fiscal rules.

Complicating matters is the lack of fiscal space left by former Conservative advisers Jeremy Hunt Although the Office for Budget Responsibility's forecasts have led to faster economic growth, the March budget was just £9 billion ($11.6 billion).

“Labor has to do a good job on growth measures to prevent minimal economic growth,” Mr Wood said. Deflation Actually”.

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