Record Growth for the UK Economy and the British Pound Sterling

While most economies in Western Europe have hardly registered any growth, there are always new reports on the expansion of consumption and output growth in the United Kingdom. However, inflation is rising.
After a severe economic recession is in the early 90s, the economic development of Britain today is steeply rising. For example, the pound gained considerable ground against the Euro. Tourists who travel to England have to dig far deeper into their pockets than they did several years ago. Unemployment on the island, which was at times at ten percent, was reduced to 4.8 percent at the beginning of 2010.

According to estimates by financial experts, the British Central Bank will increase the interest rates to cool the economy bubbling in the country increase in August. At the end of July, it was revealed that the British economy had risen by another 0.9 percent in the spring quarter as compared to the same quarter of the prior year. The overall growth was lower in comparison to the year 2009 - already 3.7 percent. “A rate hike in August, for example, is therefore now virtually certain”, says Wolfgang Glue from Dresdner Bank. The growth of the economy and the British pound sterling can slowly be felt according to economists. To switch pound to Euro is quite far for now.

Many British homeowners have financed their mortgages through higher consumption 

The Bank of England has been trying to slow the booming economy for the past nine months. It has therefore increased in four steps by a total of 100 basis points since the fall of the rate. The central bankers are particularly worried about the strong growth of value of real estate and the growing indebtedness of the household. Property prices have risen by more than 30 percent per year. The British have increased their mortgage in response to this explosive increase in value and they put into use the money they got from the banks. This is one of the secrets of the buying boom in the UK.

This development of the retail sales on the island has reached a high record in recent weeks. According to the ONS Statistical Office, the British packed goods in their cart in June for 1.1 percent more money than in the previous month. Particularly television sets and sports equipment for European football sold very well. "Retail sales could accelerate once again in the coming months", believes Malcolm Barr from the JP Morgan bank.

The foreign trade balance is negative in Britain 

The British foreign trade balance has had a growing deficit for several years. Britain exported goods worth 186 billion pounds worldwide in 2002 (about 279 billion Euros), while the imports came to 221 billion pounds in the same year (about 331 billion Euros). The main UK exports are electrical products, petroleum and petroleum products, office machinery and road vehicles. The main imports are road vehicles, electrical goods and office equipment. The trade deficit continued to rise in 2003, for instance.

Euro adoption is not in sight 

The government in London wants to introduce the Euro if it is in the economic interests of Great Britain as emphasized again and again. In its speech in the British Parliament on June, 9, 2003, Chancellor Brown noted that the economic conditions for membership established by the British government are not currently available. In the Budget Speech on March, 17, this year, he ruled out a re-examination of the economic conditions before the next parliamentary elections. If the British government then speaks for the introduction of the Euro, the final decision is made by the people in a referendum. With the improvements in British pound sterling, switch pound to Euro is not certain for now.

Currently, the country fulfilled only three of the four Maastricht criteria at that time. The budget deficit in London was at 3.4 percent, well above the Maastricht threshold of 3.0 percent. The government of Great Britain met the other three conditions for Euro adoption in early 2004: a 1.4 percent inflation rate (the Maastricht threshold is of 1.5 percent), a total debt of39.3 percent of the gross domestic product (the Maastricht threshold is of 60 percent) and the long-term interest rates are also four percent below the Maastricht limit.