The North East business community has welcomed headline GDP figures which have finally taken the economy back to pre-recession peak.
Britain has emerged from its worst post-war downturn after growth of 0.8% was recorded for the second quarter of 2014, performance putting the UK’s gross domestic product 0.2% ahead of its level at the start of 2008, the Office for National Statistics (ONS) said.
The statistics mark the end of a period when GDP slumped to 7.2% below its pre-recession levels by the middle of 2009.
Paul Feechan, senior partner at Deloitte in the North East, said: “The UK economy is back to pre-crisis levels and has gone from being the world’s growth laggard to a growth leader.
“Not only is UK growth likely to outpace the other major industrialised nations this year, it is also likely to outpace some emerging economies.
“Crucially, growth is broadening out and looking more sustainable, with corporate hiring and capital expenditure playing a bigger role. This recovery has legs.”
Company leaders across the region all welcomed the headline growth figure of 0.8%, but also urged ministers to look closer at the figures, while also calling for increased investment from the government to ensure this recovery is maintained and sustained.
Paul Moore, group managing director of construction and development specialist Southdale, said: “The headline figure on GDP looks very positive for the economy and, while we must never ignore that, a closer look at the details shows a 0.5% decrease in output in construction.
“This can be remedied by Government putting a greater focus on boosting housing, and this needs an holistic approach with politicians looking past figures, which are skewed by prices in London and the South East and making decisions, which benefit the whole country.”
Mike Odysseas, managing director of Odyssey Systems, said: “For companies that have weathered the economic storm, today’s figures are very welcome.
“They represent the hard work, flexibility, ingenuity and commitment of UK businesses that have battled through the past six years to help the economy gain momentum and return to pre-recession levels of growth.
“The service sector, which includes our business, continues to lead the way and is an excellent litmus test for where the economy is growing. We are experiencing increasing levels of confidence from businesses that are prepared to invest and have their eyes firmly set on the future rather than previously just having to survive in the here and now.”
George Rafferty, chief executive of NOF Energy, which supports more than 470 members in the oil, gas, nuclear and offshore renewable sectors, has called for increased investment in the oil and gas industry.
With the latest rise, and the International Monetary Fund forecasting the rate could hit 3.2% by the end of the year, Rafferty said: “The sector is always in the spotlight as a crucial part of the British economy and the time is right for investment.
“The longevity of our oil and gas operations is central to the UK’s future prosperity and the vast supply chain reliant on its success needs to see a vote of confidence in technology and skills to keep production high and maintain our world-leading reputation.
“Growing the sector now is the only solution. It will secure and create thousands of jobs, and give the UK an unbreakable lifeline of prosperity.”
Willie O’Neil, contract lead at Nortech Oil & Gas, part of the Nortech group of companies, a successful professional engineering design and project management company based at Wynyard, said: “The growth figures are positive news for the economy as a whole. The GDP figure of 0.8 per cent officially marks an end to one of the longest recessions in British economic history.
“North Sea oil & gas is experiencing record levels of spend as old platforms require upgrades and life extensions, and new fields get deeper and the oil gets heavier. The solutions that process engineers can offer are therefore now more critical than ever.
“Continuing investment by UK oil and gas companies is a key component of growth. Investment creates a virtuous circle that drives a momentum to service the growing supply chain, which is also a key contributor to the UK economy.
“As part of this supply chain, Nortech Group is undergoing strong growth and development. Turnover has steadily increased to £10m and we have taken on 86 new members of staff since starting up with a team of four in 2011. The oil and gas sector has plenty of scope for further growth, and the North East and its supply chain are perfectly positioned to support that growth.”
Amanda Vigar – the self-styled ‘Business Battleaxe’ – managing partner at V&A Vigar (Darlington) LLP, has a blog where she champions small business, at businessbattle-axe.blogspot.co.uk.
She believes the GDP announcement represents great news for SMEs.
Vigar said: “The growth figure is positive news for the UK economy as it is the strongest we have seen since 2008. I speak to small and medium sized businesses every day and I am also proud to count my business among their ranks.
“SMEs are the very lifeblood of our economy, and while their fortunes are certainly improving, much more needs to be done to support their growth.
“From increasing sanctions on late payers to encouraging the banking sector to be more supportive of realistic expansion and investment plans, there is still a way to go. HMRC could also do with a root and branch reform. Its processes are encumbered by bureaucracy and by a lack of resources which are throwing up errors.”
Waltons Clark Whitehill, the Teesside-based firm of chartered accountants and business advisers, believes there is still work to be done.
Heather O’Driscoll, managing director, said: “It is good to see the much-expected return to pre-crisis levels in terms of GDP, but there is still much to do before we really feel that the economy is as healthy as it can, and should be. This is good news, however, and we should welcome today’s figures and take positivity from it to help us drive towards even better times.”
Bill MacLeod, PwC’s senior partner in Newcastle, added: “The GDP data takes us past a symbolic landmark, with the level of UK output now slightly above its pre-recession peak.
“But population has also been rising, so average income per person is still around 4% below previous peaks at the end of 2007 on our estimates. It will be some years yet before average real incomes have fully recovered the losses suffered during the recession.
“There are major data revisions to come at the end of September, but the general pattern is for services to continue to lead the recovery, with a more modest contribution from manufacturing in the second quarter. Construction output was typically erratic, falling back in the second quarter after strong growth earlier in the year, but the underlying trend still seems to be upward in all major sectors of the economy.
“Looking ahead, we expect continued healthy GDP growth of around 3% in 2014 and 2.6% in 2015, but the economy could run into bottlenecks after that due to households having to rely more on real income growth than running down their savings to fund consumption. To be affordable for companies, higher real earnings require higher productivity, which has been the missing piece of the UK recovery jigsaw so far.”