The news on UK plc has been pleasing of late, but two doubts remain. Okay, the UK is expanding again, but it is growing from a very low base and very slowly. Secondly, is it the wrong type of growth?

So here is your starter for ten points: What does the UK economy need for it to grow in a more sustainable way?

Answer: more manufacturing, more exports, more investment, and better productivity.

So what did the UK get in Q1?

According to the second estimate of UK GDP from the ONS and out today, the UK economy expanded by 0.3 per cent in Q1, confirming its first estimate. Year on year the UK expanded by 0.6 per cent.

But capital formation shrunk 0.8 per cent and exports were down 0.8 per cent. So how did the economy grow? Well, domestic demand was up 0.4 per cent, imports were down 0.5 per cent (imports count as a minus when calculating GDP) and inventories were up 0.4 per cent.

In other words, one of the main contributing factors to UK GDP in Q1 was that companies built up some stock. Growth achieved that way is hardly sustainable.

As for rising demand, maybe this is connected with the talk of rising house prices. British consumer confidence does tend to be closely correlated with a buoyant housing market and it is far from clear which way the causation works.

Before the recession the UK grew on the back of household leverage as rising house prices made them feel more confident. Not much, it appears, has changed.

© Investment & Business News 2013

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