Ruth Lea CBE has been Arbuthnot Banking Group’s Economic Adviser since 2007 and was an Independent Non-Executive Director from 2005-2016.

Ruth co-founded Global Vision in 2007 and was Director until 2010, and was previously the Director of the Centre for Policy Studies (from 2004 to 2007), Head of the Policy Unit at the Institute of Directors (from 1995 to 2003) and Economics Editor at ITN (from 1994 to 1995).  Prior to ITN she was Chief UK Economist at Lehman Brothers, Chief Economist at Mitsubishi Bank, worked for 16 years in the Civil Service (the Treasury, the DTI, the Civil Service College and the Central Statistical Office) and was an economics lecturer at Thames Polytechnic (now the University of Greenwich).

She is the author of many papers and articles on economic issues and has been a Governor of the London School of Economics and Council Member of the University of London.

Tel: 020 8346 3482
Mobile: 07800 608 674


From the desk of Ruth Lea

Economic insight and financial comment related to the ever-changing financial landscape and the economic world at large.

Economic Perspectives

13th February 2017

Economic Insight - 13th February 2017

The Bank: resilient growth and rising inflation, but no hurry to raise interest rates

In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the Bank’s latest stance (13 February).
Press Release

The Bank: resilient growth and rising inflation, but no hurry to raise interest rates

Date: 13th February 2017

The Bank: resilient growth and rising inflation, but no hurry to raise interest rates

In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the Bank’s latest stance:
  • As expected, the Bank increased its GDP forecasts. Growth is now expected to be 2.0% in 2017 (compared with 0.8% in August and 1.4% in November).
  • Inflation is forecast to pick to about 2.7% in early 2018 and then fall back to 2.4% by 2020Q1.
  • The MPC gave few indications that it would tighten policy in the near-term.

UK data suggest the economy remains robust:
  • Industrial production rose 0.3% (QOQ) in 2016Q4, whilst construction output was 0.2% (QOQ) higher.
  • The trade gap eased in December, helped by higher exports, especially to non-EU destinations.
  • The latest Bank’s Agent’s report was fairly positive. Consumer spending was resilient, exports had risen and investment intentions had edged higher, but inflationary pressures were rising.
  • NIESR estimated that GDP rose 0.7% (QOQ) in the three months to January.
  • The Markit surveys for January indicated continuing growth, though a little softer than in December.
  • The SMMT reported the new car market was at a 12-year high in January.

Brexit, and related, developments included:
  • The European Union (Notification of Withdrawal) Bill was approved by the Commons on 8 February. It will now go to the Lords.
  • The Brexit White Paper (“The United Kingdom’s exit from and new partnership with the European Union”), which elaborated on the PM’s January speech, was released on 2 February.
  • Negotiating trade deals with non-EU countries is a Government priority. A recent PWC study confirmed that, over the next 35 years, emerging market economies are likely to grow substantially quicker than developed economies.

Finally, the IMF repeated its view that Greece needed further debt relief. The EU is unlikely to heed the IMF’s advice.

Ruth Lea said, “The latest data suggest the economy remains fairly robust. And, whilst the Bank sees resilient growth and rising inflation, it is clearly in no hurry to raise rates. At the very least, however, the reversal of the August cut should now be considered. The economy could cope.”
For full story:

Press enquiries:

Arbuthnot Banking Group PLC:

Ruth Lea, Economic Adviser
07800 608 674, 020 8346 3482  
Follow Ruth on Twitter @RuthLeaEcon

Bell Pottinger:
Dan de Belder
020 3772 2561

Download full article

30th January 2017

Economic Insight - 30th January 2017

Still cautiously optimistic: economic growth steady in 2016Q4

In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest UK economic news (30 January).
Press Release

Still cautiously optimistic: economic growth steady in 2016Q4

Date: 30th January 2017

Still cautiously optimistic: economic growth steady in 2016Q4

In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest Brexit news:
  • GDP growth in 2016Q4 was 0.6%, the same as for 2016Q2 and 2016Q3, confounding the OBR’s Autumn Statement expectations of a growth slowdown in 2016H2.
  • The OBR will probably revise up its growth forecasts for the Budget (8 March 2017), having cut them sharply in the Autumn Statement.
  • The Bank is expected to raise its growth forecasts again in the February Inflation Report (due 2 February). It cut them sharply in August, though partly reversed the cuts in November.
  • Other economic data were positive on the whole. The labour market remains firm, though inflationary pressures are picking up.

Brexit developments included:
  • In a major speech on Brexit (17 January), the Prime Minister confirmed the UK will be leaving the Single Market and the Customs Union, and confirmed plans to negotiate a bespoke Free Trade Agreement with the EU.
  • The Supreme Court ruled that the PM had to gain Parliamentary approval prior to triggering Article 50 (24 January).
  • The PM announced there would be a White Paper, outlining the Government’s negotiating objectives with the EU (25 January).
  • The “European Union (Notification of Withdrawal)” Bill was introduced to the Commons on 26 January.

In the light of the PM’s recent visit to the US, it is instructive to note the importance of the US economy to the UK:
  • The US is the biggest single export market for UK goods and services, and its share is growing. The share was 16.4% in 2005, rising to 19.7% in 2015.
  • UK trade with the US is skewed towards services. This is helpful to the UK, as exports of services are growing quicker than goods.
  • The US is the UK’s most important partner for both inward and outward investment.
  • UK trade with the US is comfortably in surplus, which is not the case for our trade with the EU.

Ruth Lea said, “GDP growth in 2016Q4 continued at much the same rate as in 2016Q2 and 2016Q3. The OBR, in common with many forecasters including the Bank of England, expected a slowdown in the second half of 2016 and into 2017. They will probably upgrade their forecasts in the March Budget. In the meantime, I remain cautiously optimistic.”

For full story:

Press enquiries:

Arbuthnot Banking Group PLC:

Ruth Lea, Economic Adviser
07800 608 674, 020 8346 3482  
Follow Ruth on Twitter @RuthLeaEcon

Bell Pottinger:
Dan de Belder
020 3772 2561

Download full article

12 (2016)(2015)

Comment, at a glance

GDP growth revised up to 0.7% in 2016Q4
22 February 2017

GDP (second estimate) increased by 0.7% in 2016Q4 (revised from 0.6%) to be 2.0% higher than a year earlier. The main reason for the upward revision was the higher estimate of manufacturing output. The increase in 2016Q4 compares with rises of 0.6% in both 2016Q2 and 2016Q3. However, growth for 2016 as a whole was revised down to 1.8% (from 2.0%), compared with 2.2% in 2015.

In 2016Q4 GDP per head increased by 0.5% (QOQ). It is now 1.8% above the pre-downturn peak in 2008Q1, having surpassed it in 2015Q4.

Growth was driven by the dominant services sector (79% of the economy), which rose by 0.8% (QOQ), with a notable contribution from consumer-focused industries, despite the decline in retail sales in December. Production (15% of GDP) rose by 0.3%, within which manufacturing grew 1.2%, though mining and quarrying fell 7.0%. Construction output (6% of output) increased 0.2%.

Turning to the expenditure side, a main driver of growth was household consumption, which increased 0.7% (QOQ). Gross fixed capital formation (GFCF) was flat, after rising 0.9% in 2016Q3, whilst general government consumption increased 0.2% (QOQ). The trade balance in goods and services also contributed to growth, with exports rising 4.1% (after falling in 2016Q3) whilst imports fell 0.4% (after rising in 2016Q3).

Separately, the ONS reported that business investment fell by 1.0% (QOQ) in 2016Q4, and was 0.9% lower than a year earlier. It decreased 1.5% (YOY) in 2016.

Also, separately, the ONS said the services sector grew by 0.2% (MOM) in December, to be 2.8% higher than a year earlier. The biggest contributor was transport, storage and communication, which increased by 1.8% (the biggest contribution to this growth came from the motion picture industry). Services were estimated to have grown by 2.9% (YOY) in 2016, following 2.6% in 2015.



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Public sector net borrowing surplus £9.4bn in January
21 February 2017

Public sector net borrowing (PSNB-ex, excluding public sector banks) recorded a surplus of £9.4bn in January 2017, boosted by self-assessed tax receipts, compared with a surplus of £9.1bn in January 2016, an improvement of just £0.3bn. This year’s surplus was the highest January surplus since 2000.

Due to the volatility of the monthly data, the cumulative financial year-to-date borrowing figures provide a better indication of the progress of the public finances than the individual months. The cumulative total for PSNB for the first ten months of FY2016 was £49.3bn, £13.6bn down on the £62.9bn recorded for the first ten months of FY2015. £49.3bn was the lowest year-to-date borrowing since the financial year-to-date ending January 2008. Of this £49.3bn, £22.1bn related to the cost of the “day-to-day” activities of the public sector (the current budget deficit), while £27.2bn related to the spending on infrastructure (net investment).

The OBR forecast a total PSNB for FY2016 of £68.2bn in November’s Autumn Statement, compared with an outturn of £71.7bn for FY2015 (revised down), an implied improvement of just £3.5bn. (The March Budget forecast for FY2016 had been £55.5bn.) The OBR’s revised forecast should easily be met. Indeed, the OBR’s forecast could be revised down to around £60bn for the Budget (8 March).   

Public Sector Net Debt (PSND) was £1,682.8bn at the end of January 2017 (85.3% of GDP), compared with £1,591.1bn (83.4% of GDP) at end-January 2016. The Chancellor announced in the Autumn Statement that the PSND as a share of GDP must be falling by the end of this Parliament.

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Retail sales slipped 0.4% in 3 months to January, but were 3.8% higher than a year earlier
17 February 2017

Retail sales (volume, GB) slipped 0.4% (QOQ) in the three months to January, the first fall since December 2013, but were still 3.8% higher (YOY).

In the month of January sales fell by 0.3% (MOM) and were 1.5% higher than a year earlier, the lowest growth since November 2013. The ONS said “the evidence suggests that increased prices in fuel and food are significant factors behind the slowdown”. Average store prices (including petrol stations) increased by 1.9% (YOY) in January, primarily as a result of higher fuel prices, which were 16.1% up (YOY).


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Unemployment fell 7,000 in three months to December, total annual earnings growth 2.6%
15 February 2017

Employment increased by 37,000 (QOQ) in the three months to December (QOQ), to be 302,000 higher than a year earlier. Within the total, full-time workers and part-time workers rose by 218,000 and 84,000 respectively (YOY). The employment rate (the proportion of people aged from 16 to 64 who were in work) was 74.6%, the highest since comparable records began in 1971.

Unemployment was 1.6m in the three months to December, 7,000 fewer than the previous quarter and 97,000 down YOY. The unemployment rate was 4.8%, compared with 5.1% a year earlier. It has not been lower since July to September 2005. The unemployment rate is the proportion of the labour force (those in work plus those unemployed) that were unemployed. The inactivity rate (the proportion of people aged 16-64 who were economically inactive) was 21.6%, slightly lower than in the previous three months (21.7%) and for a year earlier (21.8%).

Job vacancies remain strong. There were 751,000 job vacancies in the three months to January 2017 (sic). This was little changed compared with the previous quarter (down 9,0000) or with a year earlier (down 13,000).

Average weekly earnings for employees in Great Britain in nominal terms increased by 2.6% (total pay, including bonuses) and also by 2.6% (regular pay, excluding bonuses) in the three months to December (YOY). CPI inflation in January was +1.8%, so earnings growth is still outstripping prices inflation.

All in all, this report suggests the labour market remains firm.


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House prices inflation firmed to 7.2% in December
14 February 2017

According to official data, UK house prices rose by 1.1% (MOM) in December to be 7.2% higher (YOY), continuing the strong growth seen since the end of 2013. However, annual growth was weaker in the second half of 2016, compared with the first half of the year. The YOY increase in November was 6.1% (revised).

The UK’s four countries showed very different inflation rates in December: England (7.7%), Wales (4.7%), Scotland (3.5%) and Northern Ireland (5.7% (2016Q4)). In England, there was, as always, a significant range across the regions: East of England (11.3%), South East (8.5%), London (7.5%), West Midlands (7.1%), East Midlands (7.1%), South West (7.0%), North West (6.6%), Yorkshire & Humberside (6.5%) and the North East (4.9%).

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CPI inflation picks up to 1.8% in January
14 February 2017

The Consumer Prices Index (CPI) increased to 1.8% (YOY) in January 2017, compared with a 1.6% rise (YOY) in December. The rate in January was the highest since June 2014. The ONS said that the main contributors to the increase in the rate were rising prices for motor fuels and to a lesser extent food prices, which were unchanged between December 2016 and January 2017, having fallen a year ago. These upward pressures were partially offset by prices for clothing and footwear, which fell by more than they did a year ago. Even though CPI inflation is still within the Bank of England’s 2% “target”, it is clearly on an upward trend and set to breach it, reflecting the effects of the recent depreciation of sterling.

The CPI inflation rate for goods was 1.1% in January (0.7% in December), whilst the rate for services rose to 2.6% in the month (2.5% in December). The core rate of inflation (excluding energy, food, alcoholic beverages & tobacco) was unchanged at 1.6% in January.

On 10 November 2016, the ONS announced that CPIH (which includes an element of owner occupiers’ housing costs (OOH)) would be their preferred measure of inflation from March 2017. CPIH stands for the Consumer Prices Index, including owner-occupiers’ Housing costs. CPIH uses an approach called rental equivalence (the rent paid for an equivalent house) to measure OOH. CPIH was 2.0% (YOY) in January (1.7% (YOY) in December).

Producer output prices rose by 3.5% in the year to January 2017, compared with 2.8% (YOY) in December (table 3). The MOM increase was 0.6%. The annual increase was the seventh consecutive rise after 2 years of falls and the largest increase since December 2011. Even though output prices inflation is rising, “factory gate” inflation remains fairly modest.

Input prices, materials and fuel bought by UK manufacturers for processing, have been trending strongly upwards. The annual increase in January was 20.5% (17.0% in December), the fastest rate of annual growth since September 2008. Prices of imported materials and fuels was the largest driver of input price growth, which reflected sterling depreciation and a recovery in global crude oil prices (table 1). Imported input prices rose by 20.2% (YOY) in January (17.6% in December). Crude oil increased 88.2% (YOY) in January (table 2). 

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£3.3bn trade deficit in December, compared with £3.6bn in November
10 February 2017

The total trade (goods & services) deficit narrowed to £3.3bn in December, compared with £3.6bn in November. Monthly data are erratic but the trend seems to be fairly flat, to modestly improving, at present.

Within total trade, the visible trade deficit fell to £10.9bn in December (£11.6bn in November). Exports of goods increased by 4.4% (MOM), whilst imports rose by 1.4%. Goods exports to the non-EU rose by a buoyant 7.4% (MOM), whilst exports to the EU increased by just 1.0%. The services surplus was estimated to be £7.6bn in December (£8.0bn in November). Services exports were 41.6% of total exports in December. On a trend basis, services exports are increasing as a proportion of total trade.

Turning to the area analysis of the goods figures for December, the UK recorded deficits with EU and non-EU countries of £8.8bn and £2.1bn respectively. The recorded share of UK goods exports going to the EU, which is distorted by the Rotterdam-Antwerp Effect (reflecting UK exports routed through these ports for other destinations), was 46.0% in December. On a trend basis, the share of goods exports going to the EU is declining. A geographical breakdown of services trade is not yet available.

The largest country deficits in December were recorded with Germany (£2.7bn) and China (£2.4bn). There were also sizeable deficits with Norway (£1.3bn), the Netherlands (£1.5bn), Belgium-Luxembourg (£1.4bn), Italy (£0.8bn) and France (£0.7bn). Trade with the Netherlands and Belgium is distorted by the Rotterdam-Antwerp Effect. Surplus countries included the US (£0.9bn), Switzerland (£1.3bn) and the Irish Republic (£0.3bn).

Turning to the annual data, the total trade deficit was £39.4bn in 2016 (£29.8bn in 2015). The goods deficit widened to £134.9bn, whilst the services surplus rose to £95.5bn.


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Production output grew 1.1% in December
10 February 2017

Industrial production (15% of GDP) increased by 1.1% (MOM) in December, to be 4.3% higher than a year earlier. The increase reflected growth of 2.1% (MOM) in manufacturing (10% of GDP), whilst mining and quarrying output (including North Sea oil) slipped 1.1%. Electricity and allied industries decreased by 2.0% (MOM) whilst water and allied industries output was flat (MOM). Manufacturing benefited from a strong increase in the volatile pharmaceutical industry.

Production was estimated to have increased by 0.3% (QOQ) in 2016Q4, revised upwards from 0.0% in the preliminary estimate of GDP. But in 2016Q4 industrial production and manufacturing were still 7.6% and 4.2% respectively below their levels reached in 2008Q1, the pre-recession GDP peak.

Separately the ONS reported that construction output increased 1.8% (MOM) in December, largely due to an increase in new work, to be up 0.6% (YOY). The growth in 2016Q4 was 0.2% (QOQ), revised up from 0.1% in the preliminary estimate of GDP. On a trend basis, construction output seems to be modestly growing.

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Markit Surveys for January, weaker but show continuing growth
3 February 2017

The much-followed Markit/CIPS surveys for the three main economic sectors were a little weaker, but indicated across-the-board continuation of growth in January.
·         The Markit/CIPS manufacturing PMI was 55.9 in January, very slightly weaker than December’s two-and-a half year high of 56.1. New orders underpinned the latest expansion. Average prices rose at the steepest rate in the quarter-century of the survey, driven by higher commodity prices and weaker sterling. (Data released on 1 February 2017.)
·         The Markit/CIPS construction PMI lost some momentum in January. The PMI was 52.2 compared with 54.2 in December. All three sectors (residential building activity, commercial and civil engineering) recorded softer growth. Nevertheless, survey respondents signalled high confidence regarding the year-ahead outlook. (Data released on 2 February 2017.)
·         The Markit/CIPS services PMI eased but still indicated solid growth. The overall Business Activity Index was 54.5 in January compared with December’s 56.2. New business growth and the volume of outstanding business were still firm. Cost pressures remained elevated. (Data released on 3 February 2017.)
·         Markit said the surveys together suggested the UK economy would grow by a “robust” 0.5% in 2017Q1, if current trends continued.

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December’s mortgage approvals for house purchase modestly stronger
31 January 2017

Mortgage approvals for house purchase firmed a little in December to 67,898, compared with November’s 67,461, and were higher than the average for the previous six months (64,327), according to the Bank of England’s latest “Money and credit” press release (table I). But they were still down on the recent peak of over 75,000 (January 2014). And they were well down on the monthly data recorded in the years prior to the recession, when mortgage approvals averaged 104,000 (2007), 119,000 (2006) and 100,000 (2005). The interest rate cut in August may have stimulated the housing market, amid general market confidence. 

The stock of total lending to individuals (secured and unsecured) rose to £1,516.1bn in December, of which over 87% was secured on dwellings. The growth rate was still fairly modest, at 4.0% (YOY), unchanged from November (table G). Within the total:
·         The amount outstanding on lending secured on dwellings rose to £1,323.2bn, to be up 3.1% (YOY), unchanged from November (table H).
·         The amount outstanding on unsecured consumer credit rose to £192.9bn, a robust increase of 10.6% (YOY), but slightly down on November’s 10.8% (table J). The amount outstanding is still down on the £208bn peak of September 2008.

Total loans (amounts outstanding, including overdrafts) to non-financial businesses were £449.1bn in December, £1.5bn down on November’s £450.6bn. The growth rate was 3.6% (YOY) (table M). Within the total:
·         Loans to large businesses slipped by £2.6bn to £284.5bn, whilst the growth rate was 4.8% (YOY).
·         But loans to SMEs (defined as turnover of less than £25 million) rose by £1.1bn to £164.6bn, whilst the growth rate was 1.6% (YOY).

Net lending (excluding overdrafts, gross lending minus repayments) to large businesses was -£1.4bn and to SMEs was +£0.2bn (table N, growth rates are not published).


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