GDP grows by 0.3 per cent

The ONS figures show stagnation is still the name of the game.

The preliminary estimate for GDP growth in the first quarter of 2013 has come in at 0.3 per cent. That's higher than the vast majority of economists had predicted, coming in as it does against a consensus estimate of 0.1 per cent.

Clearly, the difference between growth of -0.1 and 0.1 per cent is where the real disconnect is in the political debate. If it were the first, then we would have been in a triple-dip recession. As it is, we aren't, and the chancellor will be able to begin a narrative of our slow return to growth. In fact, coming in at 0.3 per cent may even lead to a temptation to drop the "slow" part of that narrative. We're growing three times faster than the forecasts predicted! Break out the champagne!

And Osborne should allow himself a momentary pat on the back. Beating expecations, even vastly depressed expectations, is always a good thing. But even with today's news, the wider-scale conclusion is the same: Britain's growth is anaemic. In 2012, the economy shrank. In 2011, it grew less than one per cent. In 2013, NIESR predict that it will grow by slightly more than one per cent, and today's figures, annualised, are just 1.2 per cent growth. We won't have annual growth above two per cent until 2015.

That's disastrous on a number of levels. Our economic system is basically built around a paradigm of real economic growth in the two to three per cent range. We can handle short-term deviations from that norm, but the long-term trend must remain the same. Growth much below that isn't growth at all; it's stagnation by another name. On top of that, real GDP growth isn't the only figure we heard today; we also know the growth per capita. And in a country with a rising population like ours, we need to be growing just for that to stand still. With a population growing at around 0.6 per cent a year, that means this quarter's growth only "feels" like 0.15 per cent to any individual.

Lest you think this is just lefty attacks on Osborne, remember: I wrote much the same in February, when it seemed likely there would be a triple dip. The symbolic disconnect between recession and growth is too tempting, and too many people focus on it. The reality is, the British economy is going to be rubbish for years to come. Celebrating because it's marginally less rubbish than it might have been lies somewhere on the line between "blitz spirit" and "idiotic optimism".

Breakdown

So what's going on beneath the surface?

The GDP growth stems entirely from a growth in the service sector; that grew by 0.6 per cent in the last quarter, contributing 0.5 per cent to the overall GDP figure. That was offset by a massive fall in the construction sector, down 2.7 per cent – which knocked 0.2 per cent off the overall figure.

Those numbers show the discrepancy in the importance of the respective sectors; even more obviously, the contraction in the "Agriculture, forestry & fishing" sector, down 3.7 per cent, had no effect on the headline number. We are a service economy, and becoming more of a service economy every quarter.

Apart from that, one other figure jumps out from the release. The "government" sector, which shrunk by 0.9 per cent last quarter, grew by 0.5 per cent this quarter. That means it goes from contributing a 0.2 per cent contraction to the headline figure in Q4 2012 to adding 0.1 per cent to the headline figure this quarter. As the government has quietly put its deficit reduction plan on hold, shrinking PSNB by nominal amounts, it has been able to start spending on infrastructure. We're now seeing that effect.

An earlier version of this post confused quarterly and annual population growth. This has been amended.

GDP and main components. Figure: ONS

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Forget planning for no deal. The government isn't really planning for Brexit at all

The British government is simply not in a position to handle life after the EU.

No deal is better than a bad deal? That phrase has essentially vanished from Theresa May’s lips since the loss of her parliamentary majority in June, but it lives on in the minds of her boosters in the commentariat and the most committed parts of the Brexit press. In fact, they have a new meme: criticising the civil service and ministers who backed a Remain vote for “not preparing” for a no deal Brexit.

Leaving without a deal would mean, among other things, dropping out of the Open Skies agreement which allows British aeroplanes to fly to the United States and European Union. It would lead very quickly to food shortages and also mean that radioactive isotopes, used among other things for cancer treatment, wouldn’t be able to cross into the UK anymore. “Planning for no deal” actually means “making a deal”.  (Where the Brexit elite may have a point is that the consequences of no deal are sufficiently disruptive on both sides that the British government shouldn’t  worry too much about the two-year time frame set out in Article 50, as both sides have too big an incentive to always agree to extra time. I don’t think this is likely for political reasons but there is a good economic case for it.)

For the most part, you can’t really plan for no deal. There are however some things the government could prepare for. They could, for instance, start hiring additional staff for customs checks and investing in a bigger IT system to be able to handle the increased volume of work that would need to take place at the British border. It would need to begin issuing compulsory purchases to build new customs posts at ports, particularly along the 300-mile stretch of the Irish border – where Northern Ireland, outside the European Union, would immediately have a hard border with the Republic of Ireland, which would remain inside the bloc. But as Newsnight’s Christopher Cook details, the government is doing none of these things.

Now, in a way, you might say that this is a good decision on the government’s part. Frankly, these measures would only be about as useful as doing your seatbelt up before driving off the Grand Canyon. Buying up land and properties along the Irish border has the potential to cause political headaches that neither the British nor Irish governments need. However, as Cook notes, much of the government’s negotiating strategy seems to be based around convincing the EU27 that the United Kingdom might actually walk away without a deal, so not making even these inadequate plans makes a mockery of their own strategy. 

But the frothing about preparing for “no deal” ignores a far bigger problem: the government isn’t really preparing for any deal, and certainly not the one envisaged in May’s Lancaster House speech, where she set out the terms of Britain’s Brexit negotiations, or in her letter to the EU27 triggering Article 50. Just to reiterate: the government’s proposal is that the United Kingdom will leave both the single market and the customs union. Its regulations will no longer be set or enforced by the European Court of Justice or related bodies.

That means that, when Britain leaves the EU, it will need, at a minimum: to beef up the number of staff, the quality of its computer systems and the amount of physical space given over to customs checks and other assorted border work. It will need to hire its own food and standards inspectors to travel the globe checking the quality of products exported to the United Kingdom. It will need to increase the size of its own regulatory bodies.

The Foreign Office is doing some good and important work on preparing Britain’s re-entry into the World Trade Organisation as a nation with its own set of tariffs. But across the government, the level of preparation is simply not where it should be.

And all that’s assuming that May gets exactly what she wants. It’s not that the government isn’t preparing for no deal, or isn’t preparing for a bad deal. It can’t even be said to be preparing for what it believes is a great deal. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.