The state of Britain’s economy before general election

London, Nov 14 (AFP/APP): Ahead of Britain’s general election that Prime Minister Boris Johnson hopes will force through Brexit, Britain’s economy is a mixed picture of weak growth and high employment.

Official data this week showed the UK economy dodged falling into recession during the third quarter, heading toward the December 12 polls and amid a wider global economic slowdown.

While Johnson’s Conservative Party is promising investment and tax cuts should they win re-election, the main opposition Labour Party led by Jeremy Corbyn insist taxes for the highest paid must be increased to fund a massive programme of state spending and help bridge inequality in Britain.

UK economy shrinks as Brexit looms

– Growth rebound –

UK gross domestic product rebounded by 0.3 percent in the July-September period as growth in services offset a weak manufacturing sector, with Brexit uncertainty causing companies to delay investment projects but hold onto staff.

GDP had meanwhile suffered a 0.2-percent contraction in the second quarter, while the technical definition of a recession is two straight quarters of negative growth.

The Bank of England (BoE) last week upgraded its UK growth forecast to 1.4 percent in 2019 but downgraded 2020 guidance to 1.2 percent.

The new forecasts, which assume that Britain leaves the European Union with a deal on January 31, contrasted with prior predictions of 1.3 percent for both years.

– Low unemployment, inflation –

British unemployment hit a fresh 45-year low at 3.8 percent in the three months to September, the most recent official data showed.

That was the lowest level since the final quarter of 1974, and compared with 3.9 percent in the three months to August 2019.

Annual inflation fell faster than expected in October to a near three-year low at 1.5 percent as lower energy prices offset rising prices for clothes. That was the weakest level since November 2016.

Fading inflationary pressures have meanwhile dimmed prospects of a hike in the BoE’s main interest rates any time soon.

The central bank left its key rate at 0.75 percent in November, weighing on the pound.

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– Pound outlook –

Britain’s currency, seen as a better indicator of the UK’s economic health than the London stock market which is loaded with multinationals, has been steadier in recent weeks after some Brexit-fuelled volatility.

“The boost to the pound if a Labour government led to a softer Brexit deal or no Brexit at all would probably be offset by concerns that Labour’s other policies would make the UK a less attractive place to invest,” Capital Economics research group has said.

“Meanwhile, a Brexit deal could lead to the pound rising from $1.28 now to about $1.35,” it added in a client note.

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