From economic wreck to budding economy

 Looking for a country you can invest in that is both politically stable and likely to grow a lot faster than the global average in the next five years?

Forget the emerging economies of Asia and South America: They score fine on the second point, but not so well on the first. And you can rule out most of Europe: The euro crisis will snuff out growth for years. The United States won't be much better with its budget and trade deficits. The country you should be looking at is the United Kingdom. Its economy has been a mess for the past few years, but except for a few rioting students, the British are getting used to belt-tightening measures. It wasn't a coincidence the UK economy crashed so badly in the past two years. In reality, Britain's relative position had been declining for years. The UK was a train wreck waiting to happen.

Good numbers

Yet this year something striking has happened. The economy has expanded at a decent rate — 0.8 per cent in the third quarter, and 1.2 per cent in the three months before that.

It looks set to continue. The government's fiscal watchdog, now predicts the economy will grow 2.1 per cent next year, and by 2.6 per cent in 2012.

But the interesting question is whether the UK can outperform those expectations and grow much faster than most other economies. Here are four reasons why it may well do so.

One, the pound depreciated early, slumping against the euro as soon as the banking crisis hit. The result, as the textbooks would say, has been that the country is exporting again.

Two, the budget deficit is being taken seriously for a change. The coalition is finding it a lot easier to make tough decisions than a Conservative government with a small majority would have been able to.

Three, the UK is becoming more competitive. Average weekly earnings are rising at an annual rate of 2.2 per cent. Inflation is running at 3.2 per cent. But there is no better way to make your economy more competitive than to reduce wages. It means the country becomes more attractive to global companies.

Four, the UK is outside the euro. Britain declined the opportunity to sign up for the single currency when it was introduced. As the euro lurches from crisis to crisis, that looks like a smart call.

Nobody should start talking about an English Tiger. If those forces gather strength, Britain might be one of the stars of the coming decade.

- Matthew Lynn is a Bloomberg News columnist and the author of Bust, a forthcoming book on the Greek debt crisis. The opinions expressed are his own.