Should the UK be worried over the lack of GDP growth? - 19/08/22

Simply put, GDP- Growth Domestic Product- measures the cash value of final goods and services that are bought by the final user. It counts the output generated within the boarders of a country over a period of time- quarterly or yearly-and the price it takes for products to be created- taking careful consideration in realising whether the rising product costs is due to consumer needs or cost of living- and determines a percentage increase or decrease.

A rising GDP correlates to more jobs being created with better rates of pay. A lower numbered percentage shows a shrinking economy- if this lower percentage persist for two quarters, it is labelled as a recession.

GDP is a balancing factor that can both positively and negatively affect the economy. On one hand, a declining GDP can cause the cost of living to rise, whilst a growing GDP can exhaust the economy by neglecting resources to communities in favour of focusing on relative investments.

Economists agree that a 2.5 to 3.5% GDP growth per year is a reasonable undertaking that an economy can uphold without causing negative effects to communities.

Unfortunately, during March 2022, GDP fell by 0.1% following little to no growth in February 2022.This follows suit from previous years where GDP growth rate in 2020 was -9.7%,an overall 11.16% decline from 2019.

These yearly declines have worried investors and have caused some to speak up, believing that the UK can triple GDP growth by attracting private finance.

Lakestar, an entrepreneur investment firm, has reported findings, believing that the government could achieve this growth by attracting £75 billion of extra investment each year. This would mean calling for £1.5 trillion of funding aimed at sectors of strategic significance, including decarbonisation, biotech, and space over the next two decades.

If done right, this growth could create £7 trillion more value in the economy and lead to creating three million extra jobs.

Klaus Hommels Chief Executive of Lakestar has said, "The UK has a vibrant startup ecosystem already,", continuing to suggest, “With world-class institutions, and incredible entrepreneurs, the next phase of growth can be achieved with an ambitious strategy for scaling the companies of the future… Scaling up growth companies over the next two decades would help the UK win in battleground sectors and retain digital sovereignty."

Hommels has since been backed up by his Lakestar venture partner, Sam Gyimah, "Solving the UK financing gap would put a rocket under GDP growth and usher in a new generation of globally competitive British businesses.

Thankfully, a Decarbonisation Summit has been held in Manchester’s Science and Industry Museum, which is gathering a large number of CEOs, activists, and graduates to collaborate and discuss plans on how to progress the sector and attract investment.

With this news, it seems that the UK already has plans on addressing investment and aiming to address concerns over the lack of GDP growth over the last couple years. With this interest, it the lack of growth should not be too much of a concern, as it seems measures are underway to correct the circumstances.

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