Analysis: Britain's car industry may inspire more balanced economic recovery
By David Milliken
LONDON (Reuters) - A bumper year for Britain's car industry offers some hope the economy will start to grow in a more sustainable way, with a better balance between investment and spending.
In 2013, Britain enjoyed its best year of economic growth since the financial crisis, outpacing other advanced nations. But there was a catch. The recovery was driven by consumers spending more and saving less.
A smooth transition to longer-lasting growth, propelled by business investment and exports, is a key hurdle for 2014 according to the Bank of England.
The car industry is showing signs of leading the way - but there have been false starts before.
Every year since 2010, Britain's budget watchdog has predicted a rebound in annual business investment - but it is still a third lower than before the financial crisis of 2007-2009. It is essential for Britain's recovery.
"The pace of investment - when it comes - will ultimately determine the duration of the current upswing," BoE policymaker Ian McCafferty said in a speech to businesses last week, adding that many firms were operating close to capacity.
A string of surveys show firms are more willing to pump money into their businesses than at any time since the crisis - in the services sector as well as manufacturing.
Rebalancing is often talked about in terms of moving the economy towards manufacturing and away from services. But what the BoE wants is a shift in spending towards investment and away from consumption, rather than between economic sectors. Continued...