Debt-fuelled consumers and expensive houses drive British recovery

 

SOURCE REUTERS: Debt-fuelled consumers and expensive houses drive British recovery

Economists are now cautiously optimistic about Britain's growth prospects, but they warn that the recovery looks dangerously reliant on consumer demand and is a far cry from the export-led growth that the government, in the shape of finance minister George Osborne, had previously aimed for. The most recent gains in British economic activity appear to be linked to two factors that helped cause the last global financial crisis - debt-fuelled consumer spending and higher house prices. Households have been able to raise spending in the face of falling real take-home income by cutting into savings and easier access to credit.

SOURCE GUARDIAN: No, this is not the road to recovery. It's the road to Wongaland
Before becoming chancellor, George Osborne provided a sound analysis of the British economy. In his Mais Lecture of February 2010, he said: "The overhang of private debt in our banking system and our households weighs heavy on future prosperity." But far from pursuing a "new economic model" based on investment, savings and exports, it's back to the old inflate-the-housing-market-and-boost-consumption meme – but this time with a high-debt, low-wage economy. That is the road to Wongaland.


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