UK Economy in “Fragile Recovery”

The UK economy grew by 0.5% in Q1 of 2011 – apparently reducing the risk of a double-dip recession.

Different sectors have grown at different speeds, the manufacturing sector is doing very well, while others are struggling to make any gains. Bank lending to the SME sector has fallen again, which makes you wonder.

UK GDP Growth Q1/2011

Manufacturing has the potential like the housing market to create a recovery all by itself. If manufacturing grows all other sectors, including private households, will benefit sooner or later – look at the German economy, totally driven by manufacturing.

Small business is a major part of UK manufacturing, the potential for job creation is enormous. The pound is weak against almost all foreign currencies, creating ideal conditions for exporting. This in turn would also reduce our enormous foreign trade deficit, which would have a positive effect on our currency and economy as a whole.

All this would point to a strong recovery – so, why is it not happening? Why are other countries pulling ahead? In my opinion it is the lack of working capital in these SMEs. Once again banks are engaging in risky lending to the private sector, why aren’t banks supporting SMEs?

Is it that they fear the success of other industry sectors, which would expose them to less favoritism?

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