Investments and exports hit plan to rebalance economy

| August 25, 2012 | 0 Comments

By
Daily Mail Reporter

16:21 EST, 24 August 2012


|

16:21 EST, 24 August 2012

The plan to rebalance the British economy
was dealt another blow yesterday as
exports and investment collapsed.

Official figures showed gross domestic
product fell 0.5pc in the second quarter of
the year – better than the 0.7pc initially
reported.

But there was little evidence of the
longed-for shift away from debt-fuelled
spending at home to a greater
contribution from exports and investment.

Outgoing: Crisis in the eurozone and slowdown in the global economy hit demand for British goods overseas

Outgoing: Crisis in the eurozone and slowdown in the global economy hit demand for British goods overseas

Lee Hopley, chief economist at EEF, the
manufacturers’ organisation, said: ‘We
have to ask where growth is coming from
as the boost from trade and investment we
need to rebalance the economy is
struggling to get going.

‘Clearly the global economic slowdown is
casting a long shadow over UK activity.’

Exports fell 1.7pc between April and June
as the crisis in the eurozone and slowdown
in the global economy hit demand for
British goods overseas.

Net trade – exports minus imports –
knocked one percentage point off GDP in
the second quarter of the year, the largest
drag since 1998.

There was also a 3.2pc slide in investment
by the private sector and the government
– the biggest fall since early 2009.

Business
investment was down 1.5pc to £30bn.
Andrew Goodwin, senior economic
advisor to the Ernst Young ITEM Club,
said: ‘One genuine cause for concern is the
steep drop in investment.

‘We appear to be seeing a repeat of last
autumn, with the escalation of the
eurozone crisis damaging business
confidence and leading firms to postpone
investment plans.’

Instead, the economy was propped up by
government spending – which was 2.6pc
higher than this time last year as muchhyped
austerity failed to materialise – and
firms building up stock piles which added
more than 1.2pc to GDP.

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