In London, share prices soared as a new Conservative government emerged victorious from last week’s election.
The prospect of immediate stability saw traders breath a sigh of relief but some experts believe Britain’s economic revival remains on shaky ground.
Professor Peter Urwin of University of Westminster said: “At the moment we have an economy driven by consumer expenditure, based very much on credit card lending, people confident that they can spend a little bit more.”
“I am not confident that in the long run we can sustain these levels of growth because they’re based very much on a sort of “partyish” economy where we are spending a lot of money and running down savings,” added Urwin.
The Bank of England’s monetary policy committee has kept interest rates at a record low of 0.5 percent for six years, but should that change, Urwin sees trouble.
“If interest rates start to go up at the point when the economy is still growing because people are spending a lot of money based on credit card debt and housing equity and so on, it’ll be disastrous,” believes Urwin.
It comes as new figures show continued improvement in the jobs outlook, particularly in manufacturing.
Combined with a steady recovery in oil prices, there is perhaps more chance the UK may avoid deflation but the threat cannot be ruled out altogether.
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