George Osborne has repeatedly promised to fix the roof while the sun is shining, and after official figures last week showed GDP growth picking up sharply in the second quarter, it seemed that the clouds have finally lifted.

With the Bank of England’s policymakers due to meet on Thursday, the news that the slowdown in the first quarter was just a blip sent traders scrambling to price in an interest rate rise in the coming months.

Official figures showed growth rebounded to 0.7% after the surprisingly weak 0.4% pace in the opening months of this year. There was also sunnier news on living standards: statisticians said GDP per head, which is seen as a better guide to prosperity, was back to its pre-crisis peak.

For some on the Bank’s rate setting committee, it will probably feel as if the final hurdle to raising rates has been overcome: any worries about the tepid nature of the recovery can be put to one side, with the first-quarter weakness dismissed as a mere hiccup. So when the nine-strong team gathers this week, we can expect at least two members to vote for a rate rise, most likely committed hawks Martin Weale and Ian McCafferty. They could be joined by departing member David Miles, based on hints in his recent speech.

But others on the committee have warned about pulling the interest rate trigger too soon, and governor Mark Carney himself has hinted that nothing will happen until the turn of the year at least. Indeed, dig behind the growth headlines and the economic climate doesn’t look quite so warm.

First, the economy remains too reliant on the services sector. Construction had another lost quarter of zero growth. And despite government pledges to power a “march of the makers”, manufacturing actually shrank. So it was left to shops, bankers and hairdressers to drive growth.

The outlook for manufacturing is clouded by pressure on exports from a strong pound as well as shaky confidence in key markets. Just as Greece’s debt crisis comes off the boil, China, the world’s second-biggest economy, is being rocked by tumbling stock markets.

Second, the recovery is clearly not being felt equally throughout the economy, or throughout the country. A deep north-south divide remains, youth unemployment continues to outstrip the wider jobless rate and real wages are only just growing again.

Third, while welcomed for boosting disposable incomes, inflation at zero can also be taken as a sign of fragility in an economy which is still shaking off the legacy of recession.

This no-flation looks likely to be around for a while, given the slide in oil prices and other commodities, and it removes any immediate pressure for the Bank to tighten monetary policy.

Finally, the UK still faces massive spending cuts, which come on top of years of austerity already pushed through under the coalition government. Osborne is demanding an additional £20bn savings in public spending, and economists rightly warn that fiscal tightening on such a scale limits the scope for the Bank to tighten monetary policy.

It all makes for a tricky balancing act for the monetary policy committee this week. There will doubtless be hints that the first increase in borrowing costs since the financial crisis is nearing. But when Carney presents the Bank’s latest forecasts, there will be just as much reassurance that when “lift-off” does come, the upward slope that follows for interest rates will look more like a gentle hill walk than a steep mountain climb.

Carney and colleagues have repeatedly talked about a “gradual path”, and indicated the eventual peak for interest rates will be something like 3% rather than topping 5%, as in the months before the global financial crisis.

But borrowers beware. As manageable as that might sound, it comes alongside another huge dose of austerity – and as regular visitors to Britain’s beaches well know, the sun can disappear as quickly as it arrives.

Why the rush to sell RBS?

Sir Philip Hampton said the results released by Royal Bank of Scotland last week were like “groundhog day”. The bank’s outgoing chairman was referring to the fact that decent growth in operating profits was wiped out by a string of charges for past misdeeds. It also feels like groundhog day for watchers of Britain’s bailed-out financial institutions: this time two years ago, the City was fixated on the possible timing of the first disposal of government shares in Lloyds Banking Group.

Throughout August 2013, speculation about a sale lingered. It took until mid-September for the announcement to be made. It popped up on dealers’ screens around the City at 4.45pm – just minutes after the stock market closed – to declare that investors would be asked to buy shares overnight in what is known as an “accelerated book build”. By 7am the next morning, 6% of the bank’s shares had been sold.

Two years on, the City is playing the same waiting game for RBS. In an echo of what happened with Lloyds, last week’s half-year results from RBS clear the decks for a share sale. RBS certainly puffed up its legal disclosures, with lots more information about potential penalties for the way it sold mortgage bonds in the US before the crisis, as well as warnings about an investigation into is treatment of distressed businesses in the UK. And then it tempered expectations of when it can pay a dividend: no chance in 2016, first quarter of 2017 at the earliest. This is the type of information that prospective City investors need before they decide whether to buy shares.

George Osborne may well try to entice investors to gobble up a few this week, before pension fund managers embark on their annual summer getaway. That would be a relief to Hampton, who bows out at the start of September after a gruelling stint in one of highest-profile roles in present-day corporate life. But really, the chancellor ought to wait. Taxpayers have owned the stake for nearly seven years. What’s the hurry?

Miliband’s energy policy is alive and well



Centrica was one of the big six energy suppliers to scream “foul play” loudest when Ed Miliband said he planned to freeze prices and break up the utilities if Labour won power.

Now the owner of British Gas is cutting household bills of its own accord, while closing gas-fired power stations or selling off sections of its generating capacity such as windfarms.

The business is being beaten not by politicians, but by the free market. Centrica has made a bundle out of wholesale power and households in the past but it apparently cannot stand the competitive heat any more. The group’s former management team also gambled on the oil price staying at $100 a barrel, only to see it halve during the last 12 months.

Miliband may not have seen his policy fulfilled as a Labour prime minister, but the market is doing it for him.