The UK economy has proved remarkably resilient during the recent downswing with output falling only a little below potential. At the same time, inflation has remained close to the target and the unemployment rate is among the lowest in the OECD. More recently the economy has been gaining considerable momentum, well ahead of the euro area. This strong performance is underpinned by wide-ranging structural reforms and sound macroeconomic policy frameworks. A pro-active monetary policy successfully stabilised activity and inflation, helped by a strong transmission channel operating through the housing market. The government budget balance was in substantial surplus at the peak of the cycle and this has enabled fiscal policy to be strongly supportive of growth during the downswing, although the government deficit has now become sizeable. In the context of this impressive macroeconomic performance the decision that was taken in June 2003 to wait further before holding a referendum on entry into the European monetary union is perhaps unsurprising. All in all, the United Kingdom seems well placed to take advantage of the global recovery and move towards a more broadly based growth that relies less on consumption and housing wealth...