15/09/2010
The European Commission has upgraded the UK's economic prospects after Britain recorded the fastest three-monthly growth rate since 2001.
The rise in GDP was more than double the amount predicted by the Commission's experts last spring. The GDP of the UK rose sharply from just 0.3% in the first quarter of the year to 1.2% in the second quarter. This lead the Commission to revise its previous forecast of GDP growth for the whole year up from 1.2% to 1.7%.
It's expected that GDP will also accelerate quickly in the last quarter of 2010 as people are encouraged to spend before the VAT hike in January. However, the Commission warned that this will be balanced out by a drop in spending in the first quarter of 2011 as people are put off by the inflated VAT cost.
Businesses might pay attention to this fact and be encouraged to invest in their business before the VAT hike next year, when everything will cost more. One way to get money quickly to invest sooner than later includes invoice factoring, which basically gives a business funds tied up in their invoice before the clients pay it. This is a fast way of boosting cash flow that would allow a business to grow before they're hit with higher VAT bills.
The forecast of the British economy is more optimistic than that of all the other major EU countries, including France, Germany, the Netherlands, Spain, Italy and Poland.
The Commission added that, in the wake of the economic downturn, "a double-dip seems unlikely".
Laura Nineham