Martin Flanagan: UK growth goes on despite China

A businessman shelters from the rain in Tokyo. Many economies across the globe are doing something similar, weathering the storm consuming the Chinese markets. Picture: Getty Images

A businessman shelters from the rain in Tokyo. Many economies across the globe are doing something similar, weathering the storm consuming the Chinese markets. Picture: Getty Images

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STORM clouds may be gathering in China, and the eurozone still looks somewhat of a fragile recovery, but on the home front the UK economy continues to set a steady pace.

There was some concern the rebound had faltered in the first quarter when growth came in at only 0.4 per cent.

But yesterday official figures confirmed more normal service was resumed in the second quarter of 2015, with growth of 0.7 per cent, increasing GDP over the past 12 months to 2.6 per cent as expected.

At 0.7 per cent, household spending in Q2 was slightly down on the 0.9 per cent seen in Q1. But it is still the 16th consecutive quarter on increased consumer spending.

That does not overly please the theorists, who believe a recovery based on consumer spending doesn’t have legs and would prefer a greater component provided by business investment and exports.

But there was even better news there, for a change, with exports rising an impressive near-4 per cent between April and June compared with a more anaemic 0.4 per cent in the previous three months.

Likewise, business investment rose 2.9 per cent in Q2 after a 2 per cent gain seen in the second quarter. Chancellor George Osborne is right that we cannot be immune from the slowdown in China, the world’s second biggest economy, but we should still take the good news where we find it.

There was also a big cut in Britain’s trade deficit in the second quarter, adding to the generally more positive picture, while unemployment is low.

Perspective is needed. We are still only marginally more down the road in rebalancing our economy, while China is clearly now a major maverick factor that Britain’s economy will have to contend with. We have also had the booster rockets of historically low interest rates boosting consumer spending for six years now, and that cannot continue indefinitely. As also can’t exceptionally low levels of inflation.

But, even when rates eventually rise, the Bank of England has stressed it will be in modest stages and to generally lower levels for quite some time than we have been used to traditionally.

In short, Britain’s economic situation and its overall prospects remain pretty benign six years after the end of the last recession.

There can only be one Bwin-ner

IT looks like the two-way takeover battle for online gambling firm Bwin will go down to the wire. The company accepted a £900m offer from 888 in July, but rival GVC has been negotiating in the wings with Bwin over its improved £1.03bn offer made in early August.

Even so, 888 and quite a few institutional investors believe the initiative still rests with it, given the greater cash component of its offer, 39.45p a share versus the 25p proposed by the smaller Aim-quoted GVC.

I still believe the day will eventually belong to 888. Its bigger business, balance sheet and stock market valuation give it a strong head start.

Even if GVC sweetens the cash component of its offer I think 888 can still blow it out of the water with an improved bid of its own.

It will be a busy weekend for all three companies and their investment banks, the latter sector incidentally making hay while the consolidation sun shines in the gambling industry.

That also includes the mooted deals involving Ladbrokes and Gala Coral, and Paddy Power and Betfair. Game on.

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