Stephen Millard, Deputy Director for Macroeconomic Modelling and Forecasting at the National Institute of Economic and Social Research (NIESR), spoke to CGTN Europe about the UK and EU economies.
00:00Stephen Millard is from the National Institute of Economic and Social Research.
00:04Joining us now, hello Stephen.
00:06Where is the growth in the UK coming from?
00:09I know it's a little bit, but it's important to know where growth is happening.
00:14Yes, well, we've had a strange first half of the year in that the first quarter was very, very strong.
00:20And in particular, it was investment that caused that.
00:25Now, in the second quarter, investment was a lot weaker, but government spending is coming to the fore.
00:30And government spending, indeed, is what's going to ensure the economy grows for the rest of the year.
00:36The big question, though, is why that business investment was brought forward into quarter one.
00:42And that was likely a result of the increases in national insurance that kicked in in April.
00:49So over the first half of the year as a whole, the UK has grown reasonably, but not super fast.
00:56So bearing in mind those variables, where is it trending?
01:00Are we looking essentially at a stagnation?
01:03Is it actually sliding?
01:04Or could we be at the beginning of a good turnaround?
01:09I don't know about it being a turnaround.
01:11I think the UK has been growing pretty close to trend for the best part of last year and this year.
01:18We expect that to continue.
01:20Given the figures for the first half of the year, actually, it's possible that we'll get growth of 1.4, maybe even 1.5 percent this year, which is slightly above trend.
01:31But we're not seeing a sudden pickup or anything like that.
01:35And if we broaden our scope and bring in the EU, would you say that the UK and the EU are broadly sluggish and they're facing similar challenges?
01:47Well, they're certainly facing similar challenges.
01:49The EU, to be honest, is more sluggish than the UK at the moment.
01:53I think the big challenge facing everyone is the tariffs that are getting put on in the United States.
02:01So these are affecting the EU more than the UK for two reasons.
02:06One is the EU are facing a higher tariff than the UK is on all of its goods.
02:13The second reason, though, is the tariffs are much higher on cars and metal, steel in particular.
02:20And that's really affecting Germany.
02:22And Germany is the powerhouse of the EU.
02:24If German growth is sluggish, then the rest of the EU will be sluggish with it.
02:30Where could we most realistically see growth coming from?
02:35Well, the big thing in Europe at the minute are moves to increase defense spending.
02:40And that's likely to push up on growth in particular in Germany and France over the next year or two or three.
02:52In the UK, we've got a similar thing there, although obviously in all countries, the public finances are not in wonderful shape, shall we say, for a big expansion of spending.
03:05All right. Thank you so much for chatting to us. Really appreciate it.
03:08Stephen Millard from the National Institute of Economic and Social Research.
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