UK economic output, as measured by gross domestic product (GDP) increased 1.1 per cent in the second quarter of 2010 according to the preliminary estimated published on 23 July 2010. The consensus view is that recovery will be slow. HM Treasury’s July average of independent forecasters suggests 1.2 per cent economic growth in the UK in 2010.

OBR growth assumptions have come under scrutiny. For example, the CIPD suggest that OBR forecasts for growth are too optimistic, and instead predicted a 5 year jobs gap. Partly as a result of the recent budget statement, the IMF has downgraded the UK economic forecast. The IMF estimates that the UK economy will grow by 1.2 per cent this year, the second-slowest growth rate in the G7 group and 0.1 per cent lower than its previous estimate in April.

Businesses continue to report recovery in output and orders, especially in manufacturing. Although confidence is increasing, output is still below pre-recession levels. We are yet to see marked recovery in total employment. Business confidence is yet to feed through into official employment counts.

The key challenges to business including public sector expenditure cutbacks. Business suppliers to the public sector are the least optimistic. Housing and economic projects are at risk, and the housing market has stalled, largely due to weak consumer confidence and uncertainty over changes to the planning system.

The commercial property market is weak. Market values are low, and property fund and company valuations have weakened. BNP Paribas recently estimated that will take 15 years for prices to recover to pre-crisis levels.

In the labour market, there is stability, but there are future risks of further increases in female unemployment and structural changes in the labour market. The East of England labour market remains comparatively healthy in relation to other regions in the UK. Unemployment (6.6%) is well below the UK rate (7.8%) and economic inactivity (18.8%) is the lowest in the UK (21.3%) alongside the South East.

All of the increase in unemployment over the last year is accounted for by women. Employment prospects for women may weaken further if public services are the main focus of future job losses.

In international trade, the prospects for an export-led recovery are not encouraging. Exports of goods and services fell 1.7 per cent whilst imports rose 1.6 per cent. Lending to businesses is improving: with fewer new reports to Business Link by businesses experiencing problems accessing finance.

In agriculture, field crops continue to be hit hard by low prices and unfavourable growing conditions. Growers and producers are having difficulties managing exchange rate volatility.

Contact Glenn Athey Insighteast@eeda.org.uk