The UK unemployment rate may have fallen in the first three months of this year to 5.5%, from 6.8% a year earlier, and the latest wage rise may have beaten forecasts, but some analysts are not convinced with Britain’s economic recovery.
On BBC’s Today radio programme, Danny Gabay director at Fathom Financial Consulting said he has “serious misgivings” about the state of the UK economy.
“There is too little productivity, too much debt and growth is slowing down,” he said, before adding that it’s “a myth” to think inflation causes real wages to rise.
He warned he does not see a decent real wage rise unless productivity rises as well. In Britain, real wage growth only picked up a few months before the election.
Now, according to the Office for National Statistics data, pay for employees in Britain increased by 1.9%, including bonuses, and by 2.2% excluding bonuses. This beat expectations of 1.7% and 2.1%, respectively.
In February, a report by the Organisation for Economic Cooperation and Development (OECD) said UK GDP is finally back above its pre-crisis level. This was based on Britain’s record levels of employment and plunging household and business saving.
On the former, the UK has experienced what many are calling a “jobs miracle”. Unlike during previous recessions the UK saw unemployment rise by far less than might have been expected considering the severity of the crisis, and fall far quicker during the recovery.
However, Fathom Financial Consulting’s analyst Gabay’s comments today, fall in line with a number of other analysts’ views that thinks the British economic recovery is extremely fragile.
For example, Society Generale’s Albert Edwards said in April that the UK economy is “a ticking time bomb.” He said “after five years of the Conservative and Liberal Democrat coalition government, the UK economy looks like a ‘ticking time bomb’ waiting to explode after the election,” in an analyst note.
That’s based on the UK’s two big deficits — the government budget deficit that everyone knows about, and the less well-known current account deficit.
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