Figures showing a greater than expected decline in UK economic growth over the last quarter of 2010 are minor and not likely to be indicative of the health of the UK recovery.
The UK economy was reported to have shrunk by 0.5% in the final quarter of last year, until revised figures were published showing a 0.6% dip – thought by many analysts to have been prompted by sluggish retail sales and severe weather conditions in the run up to the traditionally busy Christmas shopping period.
However, with other sectors of the UK economy, such as manufacturing and heavy industry, showing strong signs of a robust recovery, it is thought that the UK economy will grow up leaner, more focused and more productive as it moves out of the aftermath of recession.
While the figures were a blow to current government economic policy, the wider picture of UK economic health showed strong signs of promise for the coming year.
The UK economy clearly remains fragile in its current state, and the levels of growth that can be expected over the coming twelve months still look unlikely to set the world alight. While some have been quick to criticise and read into the 0.6% decline in growth reported for Q4, it is submitted that the UK economy will continue to strengthen and grow at a steady pace as public sector spending is brought back into line with revenue, with more traditional industries such as manufacturing flying the flag with record rates of growth.
For investors looking to the long term, we believe this signals a more rounded, more diversified UK economy which will in turn boost industry and help cement market confidence in the future of UK plc. While the figures are no doubt a slight setback, we firmly believe that the economy and the markets will rally over the medium-to-long-term as the UK economy enjoys fresh, leaner growth.