By Angela Monaghan Run your business Britain’s policymakers are betting on businesses for economic growth this year 11 Aug 2014 The recovery powers on, with a 0.8% increase in GDP in the second quarter extending the run of good news. It has mostly been going the chancellor’s way in recent weeks, with a flurry of upbeat data at home and a recognition from the International Monetary Fund that the UK economy is likely to outperform its G7 peers in 2014. But there are still niggling inconsistencies which have left economists scratching their heads, not least the question of why wage growth remains so weak despite a rapid fall in unemployment. For some, fearful of the ‘wrong kind of recovery’, the early stages have been too reliant on the consumer. But there has been some better news on that score in recent months, as companies play a more active part. Business investment increased by a punchy 5% in the first quarter of 2014 to £33.4bn according to the latest available official figures. It was the highest level of investment since the third quarter of 2008, when the US investment bank Lehman Brothers collapsed, plunging the global financial system into a deep and prolonged crisis. The first quarter figures suggested companies – accused in previous quarters of sitting on cash piles – are starting to feel more confident about the outlook and are responding to a growing economy. The data was jumped on by George Osborne as evidence that recovery is becoming more broad based and sustainable. The pressure is now on businesses to keep up the good work The Office for Budget Responsibility – the government’s official and independent forecaster – is predicting a big rebound in business investment with growth of 8% and 9.2% in 2014 and 2015 respectively, following a fall of about 1% in 2013. Meanwhile growth in consumer spending is expected to moderate from 2.3% last year to 2.1% and 1.8% in 2014 and 2015 respectively. Such a trend reflects the historic norm, with business investment typically contributing more to GDP in the later stages of a recovery, but companies also need the right environment to invest. Osborne has thrown his weight behind the private sector, but some things are beyond his control. Uncertainty is the enemy of investment and there has been plenty of that around. At home a perfect storm is brewing as a decision on Scottish independence fast approaches, followed by a general election in May next year and a potential exit from the European Union thereafter. Interest rates will rise for the first time in more than five years, if not by the end of this year then early next year barring any major shock. The impact on businesses and consumers accustomed to low borrowing costs is unknown. A rising pound is another risk for UK companies wishing to sell their goods and services abroad. Away from home tensions between Russia and the West are mounting, conflict in Gaza shows no sign of abating, and recovery in the eurozone – Britain’s biggest trading partner – is barely there. Traders tend to look through many of these broader risks to recovery, but companies with limited budgets do not. The Chancellor has been right to stress that the job is not yet done on the recovery, and policymakers at the Bank of England believe 0.8% in the first and second quarters might be as good as it gets for the economy this side of the election. UK businesses have been a shining light in the early part of 2014 but there are testing times ahead. Angela Monaghan is freelance journalist who specialises in writing about business, industry, economics, manufacturing and defence & automotive. Angela has previously worked at The Daily Telegraph and currently writes for The Guardian. This article is the first of two blogs by Angela exclusively for AAT Comment. (Second blog to appear in September.) Angela Monaghan is freelance journalist who specialises in writing about business, industry, economics, manufacturing and defence.