By Dow Jones Business News, February 22, 2013, 05:14:00 AM EDT
By Ainsley Thomson
There are "green shoots on the horizon" for the U.K. economy, the European Commission said Friday, an opinion that
will be welcomed by Treasury chief George Osborne who is struggling to turn around the country's economic fortunes.
In its latest forecast, the European Union's executive arm left its projection for the U.K.'s 2013 gross domestic
product growth unchanged at 0.9%. The commission slightly lowered its forecast for economic growth in 2014 to 1.9% from
its November projection of 2.0%.
The commission said the U.K. economy, which contracted in nine of the 12 months in 2012 and has barely grown since the
coalition government took office in 2010, is poised to receive a boost from increased household and business
"Positive contributions to growth from consumption are expected in 2013 and 2014 on a slow but progressively improving
basis, as inflation falls more gradually than anticipated and nominal wage growth remains weak," the commission said.
It said the rate of inflation--which has been continuously above the Bank of England's 2.0% target for the past three
years--would be 2.6% in 2013, higher than its November forecast of 2.1%.
Consumer price inflation was 2.7% in January, the same rate it has been since October.
The relatively upbeat European Commission forecast comes after a tough week for Mr. Osborne, in which the government's
auction of the country's superfast mobile bandwidth fell more than a billion pounds short of expectations, and a ruling
stated that not all the profits from the central bank's stimulus measures can be transferred to government coffers.
The combined effect of the disappointing 4G auction and the ruling means Mr. Osborne is now unlikely to meet his
borrowing target for the year.
While the chancellor is likely to welcome the Commission's view that there are "green shoots" on the horizon, he is
unlikely to use the phrase himself. The words "green shoots" have proved politically toxic in the past; in 1991, then
Chancellor of the Exchequer Norman Lamont was severely criticized for using the term despite the country being in
recession, and in 2009 former Business Minister Shriti Vadera was also chastised for using the words.
Write to Ainsley Thomson at email@example.com
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