|Britain is growing again. That’s the message that needs to be taken from Thursday’s first-quarter GDP figures.
Doom-mongers will point out that the economy is still 2.7pc smaller than its pre-recession peak and in the midst of the slowest recovery in a century, but there’s nothing new in that.
What has changed is that the UK dodged a triple dip and that growth, at 0.3pc, was better than even the optimists dared hope.
The importance of Thursday’s bounce cannot be understated. The outcome was always going to be a pivotal moment. The early year’s optimism has petered out since the UK was stripped of its AAA rating and in the face of deep downgrades by both the Office for Budget Responsibility and the International Monetary Fund. A triple dip would have reinforced the sense of gloom. Instead, the first quarter could herald a domestic revival.
The economy has some fundamental problems, not least a shocking trade deficit that is being made worse by the eurozone’s troubles and a banking industry cowed into risk-averse submission. High among them, though, is business’s lack of confidence.
Companies want to invest and have the money to invest but will sit on their £750bn cash pile for as long as they believe there is a risk of another slump. Recovery, even a feeble one, carries the allure of returns.
On Thursday, business was finally given a reason to believe the Chancellor when he claimed once again that the country is “healing”. There is a long way to go but even the bad news contained some good. Manufacturing shrank by 0.3pc but that was down to a terrible January. February and March have been strong. The Office for National Statistics may revise its growth estimate, but the trend suggests – if anything – it will be pushed higher.
Efforts to rebalance the economy are clearly failing, as the consumer and the Government still account for the bulk of growth, but Mr Osborne’s “march of the makers” vision can wait. The EEF manufacturers’ organisation claims the industry is retooling for overseas demand and will be ready when the world economy gathers momentum.
In the meantime, ambitions for the UK have been set so low that just one more quarter of respectable growth could change perceptions and restore confidence. If so, Thursday may have been the start of the real recovery.
Google will succeed despite the bureaucrats
Nearly two and a half years ago, Microsoft led a consortium of companies that claimed Google was abusing its dominance of internet search. On Thursday, the search giant formally put a plan to the European Commission explaining how it will address these concerns.
These are claims that American regulators have already dismissed, and which clearly do not bother consumers much either. Many suggest Microsoft’s claim is simply sour grapes. Online, any user is just a click away from another site. When Google says its success is based on the trust of its users, it’s telling the truth. Users believe it, rather than Microsoft Bing, delivers the best answers.
The complaints hinge on so-called “vertical search” where, for instance, a user is looking for flights. Rival vertical search engines provide answers that, they claim, are better than Google’s but are pushed down the crucial results pages because Google gives priority to its own services. Google says it doesn’t, but its solution now is to label the results from other providers more clearly anyway.
Ironically, the complainants now say that such labelling might actually disadvantage them because users like Google too much.
If the European Commission accepts the proposals, perhaps Microsoft et al could bring another complaint, demanding their results be unbranded. Thus the army of advisers and bureaucrats who have already paraded in this circus could perform an encore. They are, so far, the main beneficiaries of an exercise that will achieve very little beyond slowing the legitimate success of Google and - by setting a precedent - of other digital businesses in the future.
No surprise that O’Neil has had enough of UKFI
Being chief executive of UK Financial Investments may one day be an interesting job but that day has yet to come. Since its creation in the wake of the 2008 banking crisis three men have come in to run UKFI, yet not one of them has got within sniffing distance of selling a single share in Lloyds or RBS.
This would not be such a problem if the job carried the mandate it was supposed to - that of intermediary between the Treasury and the banks. However, as George Osborne’s increasingly interventionist statements make clear, if the Government has something to say to the banks it doesn’t need a middleman to pass on the message.
So what does a chief executive of UKFI actually do? The latest hospitality records show endless lunches and dinners with investment bankers, regulators, headhunters and, yes, financial journalists, and just one expense claim for a £12 taxi journey.
Who, then, could blame Jim O’Neil, UKFI’s current boss, for deciding that, after three years in the job, he fancied a return to the more exciting and lucrative world of investment banking? As Mr O’Neil is likely to have concluded after some 1,000 days as a quasi civil servant, the Government’s policy towards the banking industry is a muddle. For every statement about the need to get out of its holdings in Lloyds and RBS comes another that makes this task more difficult.
In just three years since becoming Chancellor, Mr Osborne has set up two major commissions to investigate the banking sector, creating uncertainty that has made selling the shares at anything close to their break-even price impossible.
With the latest commission due to report within the next month and certainty at last emerging over bank capital rules it seems that Mr O’Neil’s successor may have a better chance of overseeing the sale of some of the state’s holdings. However, recent history suggests consensus and certainty rarely last for long where banks are concerned.