Neptune’s Paul Caruana-Galizia: what’s behind the UK’s recovery?

The UK is ending what has been its slowest economic recovery on record with a marked acceleration in growth. Neptune’s forecast for UK GDP growth in 2014 is 2.5 per cent, up from 2013 growth of 1.8 per cent as estimated by the Office for National Statistics. When considering the changing UK macro outlook, three important questions remain:

1. What explains the recent acceleration in growth? 
UK banking sector losses were concentrated in non-UK assets. Improving credit provision depended on deleveraging happening overseas, particularly in the eurozone. As external conditions improve, largely due to European Central Bank intervention, the UK’s banking system is recuperating and domestic financial conditions are easing.

We have also seen improvements in external demand among the UK’s biggest export partners. According to the latest IMF data, 55 per cent of the UK’s exports go to the EU and 11 per cent go to the US. Both regions are registering faster GDP growth and purchasing manager indices (PMIs) are in expansion territory.

To read the remaining questions, please click here.

Paul Caruana-Galizia is an economist at Neptune Investment Management


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Any views expressed within this communication are those of Neptune as at the date of issue. We do not undertake to advise you as to any changes in our views. The information and statistical data contained in this email has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness.

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