Analysis: In Britain, economic recovery increases PM Cameron's political capital

Fri Aug 16, 2013 5:34am EDT
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By Guy Faulconbridge and Andrew Osborn

LONDON (Reuters) - British Prime Minister David Cameron may be close to pulling off one of the most significant feats of his premiership: delivering a solid economic recovery ahead of a 2015 election.

Two consecutive quarters of growth have shifted the sands of British politics: six months ago, lawmakers in his ruling Conservative party warned him that failure to lead Britain out of stagnation could cost him, and them, the election. Those fearful voices have fallen silent.

After cutting Britain's biggest budget deficit since World War Two by a third, Cameron leads what could be the fastest growing major economy in the European Union this year.

"Will the better economic data change the political landscape? Well, economics is the biggest issue," said Steven Bell, director of multi-asset investment at F&C Asset Management which has about 98 billion pounds ($151.52 billion) under management.

"Having pursued a policy of austerity, the government will get credibility both for prudent management and for the recovery," said Bell. "They will get the credit for this."

Britain's $2.5 trillion economy grew by 0.6 percent in the second quarter after a 0.3 percent rise in the first quarter, putting it on course to grow by at least 1.4 percent this year.

That would be the strongest annual growth since 2010, the year Cameron forced Labour's Gordon Brown from office by forming a coalition government with the Liberal Democrats after no party won an outright majority in a general election.

Some investors say Cameron's policies may in fact be partly to blame for the recovery's long wait. But they still expect the government to benefit.   Continued...

Britain's Prime Minister David Cameron listens to a question during a news conference at Number 10 Downing Street in London March 14, 2013. REUTERS/Nick Ansell/pool