UK economy in double-dip recession

 

'Everything is going up in the shops and wages aren't'

The UK economy has returned to recession, after shrinking by 0.2% in the first three months of 2012.

A sharp fall in construction output was behind the surprise contraction, the Office for National Statistics said.

A recession is defined as two consecutive quarters of contraction. The economy shrank by 0.3% in the fourth quarter of 2011.

BBC economics editor Stephanie Flanders says it "adds to the picture that the economy is bumping along the bottom".

She said economic output was slightly smaller now than it was in the autumn of 2010.

Wednesday's figure is an early estimate and is subject to at least two further revisions in the coming months. It is compiled using 40% of the data gathered for later revisions.

The UK economy was last in recession in 2009.

'Catastrophic'

Prime Minister David Cameron said the figures were "very, very disappointing".

Ed Miliband: "Arrogant, posh boys just don't get it"

"I don't seek to excuse them, I don't seek to try to explain them away," he said at Prime Minister's Questions.

"There is no complacency at all in this government in dealing with what is a very tough situation, which frankly has just got tougher."

He said it was "painstaking, difficult" work, but the government would stick with its plans and do "everything we can" to generate growth.

Labour leader Ed Miliband said the figures were "catastrophic" and asked Mr Cameron what his excuse was.

"This is a recession made by him and the chancellor in Downing Street. It is his catastrophic economic policy that has landed us back in recession," Mr Miliband said.

Construction questions

The ONS said output of the production industries decreased by 0.4%, construction decreased by 3%. Output of the services sector, which includes retail, increased by 0.1%, after falling a month earlier.

These figures are slightly worse than many expected, but the fact that the UK is now technically back in recession should not detract from the underlying reality, which is very much as predicted.

The UK economy has been bumping along the bottom for more than a year and is still struggling to gain momentum.

Many have questioned the dire numbers for the construction sector, which accounts for less than 7% of the economy, but has done much to pull the GDP figure into negative territory.

The sharp fall in output from the production sector is also at odds with recent business surveys (though manufacturing has not fallen as the sector overall).

However, this preliminary figure is consistent with the message coming from official and private data - that the UK was once again relying heavily on services and consumption by households. That suggests the recovery will continue to be weak, though whether we will see further quarters of negative growth is very much an open question.

It added that a fall in government spending had contributed to the particularly large fall in the construction sector.

"The huge cuts to public spending - 25% in public sector housing and 24% in public non-housing and with a further 10% cuts to both anticipated for 2013 - have left a hole too big for other sectors to fill," said Judy Lowe, deputy chairman of industry body CITB-ConstructionSkills, said.

Some have questioned the validity of the ONS's figures, particularly on the construction industry, which has been particularly volatile in recent quarters.

But Joe Grice, chief economic adviser to the ONS, said the construction data was based on a survey of 8,000 companies and had been carefully checked and double checked.

The latest figures supported the view that the economy had been "flattish" in the past few quarters, he added.

Over the last year and a half, the economy has fluctuated between quarters of growth and contraction.

Bank of England governor Sir Mervyn King has previously warned that the economy will continue to "zig zag" this year.

He had forecast growth in the first quarter but then a contraction in the second quarter, when the extra bank holiday for the Queen's Diamond Jubilee is expected to reduce output.

'At odds'

"It is clearly not good news, the missing link in the economy has been confidence," said Graeme Leach, chief economist at the Institute of Directors told BBC News.

"We're part of a very strong automotive sector," says Midlands car parts maker Lander Automotive

"These are relatively small falls, so we shouldn't be too alarmist.

"[But] regardless of the figures, it is the message that comes out to business - to be cautious - exactly when we want them to be a little more aggressive in terms of recruitment and investment."

However, some pointed to other recent business surveys, which painted a more positive picture of the economy.

"These figures are at odds with the experiences of many UK businesses, which continue to operate with guarded optimism," said David Kern, chief economist at the British Chambers of Commerce.

He added that he expected the preliminary estimate to be revised upwards when more information became available.

The estimate for construction output is based on published data for the first two months of the quarter, and an estimation for the third month.

But the ONS pointed out that, while there was "a tendency for upward revisions" to construction, March would need to be "exceptionally strong" in the construction sector to produce growth in the quarter.

The first estimate of GDP for the last three months of 2011 showed a contraction of 0.2%, which was later revised to a contraction of 0.3%.

 

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  • rate this
    0

    Comment number 299.

    214. Anglophone, I totally agree. I think everyone does deep down. Yes things are tough, painfull, and everyone will have to work longer for less (including teachers and civil servants), but there is no money. The tax and spend brigade need to understand this is a long term readjustment to the excesses of the post war period. We all need to start accepting, and coping, with long term austerity.

  • rate this
    0

    Comment number 298.

    Just heard a no-doubt stinking rich venture capitalist saying that we need to cut the public sector because private sector companies need to compete with them for workers and public sector pay is too high. So sack public sector workers and then private companies can grow of the strength of hiring them for a pittance. Marvellous.

  • rate this
    +6

    Comment number 297.

    It is impossible to maintain constant growth within an economy because this directly conflicts with technological advancements. We aren't in a depression or recession we are simply replacing human labour with machines and consolidating products and services through technology. This should be welcomed but because of the social and economic structure forced upon us we don't reap the benefits.

  • rate this
    +2

    Comment number 296.

    @222 Just because the government put a spin on things and claim that something ended - doesn't mean it did, it means they are trying more lies as a means to get people buying! The recession wont go away in this country until it goes away in ALL countries. The present economy is borked, it needs tearing down and restarting (shame that will mean the rich no longer will be rich lol)

  • rate this
    -1

    Comment number 295.

    Let it be.

    The powers that be should've let the economy take its natural downward path, instead of propping up the housing market and injecting billions into a tired old economy etc.

    What goes up must come down, profits can't continue to rise indefinitely, you can't get blood out of a stone.

    Things still needs to get worse before they can get better.

    Let it be.

  • rate this
    -2

    Comment number 294.

    Oh dear! Stephanie says, on her current TV news comment clip, this further FALL in output is us 'bumping along the bottom'.
    No, we are in free fall without a parachute, Stephanie.
    ''About what we expected'? Only if we feared disastrous news But most 'experts', eg OBR, were saying 'Second recession to be avoided' Head-in-the-sand Editorial comment is Lib-Dem-style conivance, not analysis

  • rate this
    -3

    Comment number 293.

    The parlament should extend it's mandate to at least 10 years on the grounds of full scale economical crysis, just like it did during WW2. This will remove aby political agenda and make parlament work on real issues.

    It then should drop all the useless reforms (like Lords reform) and concentrate on rapidly reducing welfare expenditure and increasing capital investments.

    Otherwise - chaos

  • rate this
    +2

    Comment number 292.

    Why would the g'ment want to cause a fuel panik which would increase costs for businesses.
    YOU just want to make sure YOUR alright you bunch of hypocrits. Only an idiot would think it's a case of spending more by borrowing...... oh I forgot you were the ones happy to borrow from the banks, topping up the bankers bonuses borrowing money you couldn't really afford to pay back.

  • rate this
    +2

    Comment number 291.

    I think it's amusing how so many people on here think they know better than everyone else.

    If you personally owe money the worst thing you can do is borrow more, but yet that's exactly what labour and some of the public want. If you told Ed Miliband that you owed £100k and couldn't pay it back, he wouldn't tell you to borrow another £50k would he......

  • rate this
    +2

    Comment number 290.

    'I work in Plant Hire. The construction industy has flagged a little because of the terrible weather, no one knew when winter was actually going to bite and now the rain is putting a big dampner on general DIY. Its nothing to worry about, the latter half of this year is going to be very busy.'

    People have actively clicked on unrecommend on this statement? Why?

    Doesnt he know his own business??

  • rate this
    +5

    Comment number 289.

    AS the director of a small manufacturing firm,we have seen no help throughout "the recession" which in all fairness ended for us 12 months ago,we have been busier and steadier ever since- however why doesnt the government do more to for us,to fight off far eastern competition,so as we employ people to pay tax,rather than taxing us more to pay for jobs within government where they waste our taxes!

  • rate this
    -2

    Comment number 288.

    Stephanie Flanders says "Many have questioned the dire numbers for the construction sector"
    I don't need to question the numbers, I just need to look out of my office window. I remember once counting seventeen tower cranes and now I can't see a single one. Each tower crane represented a large building site and maybe 50+ well paid jobs. All gone, thanks to Cameron's short sighted policies.

  • rate this
    +2

    Comment number 287.

    The only thing we can take cold comfort in,is that the Eurozone is all going down the swanny. Italy has been destroyed and i wont be suprised if France joins suit soon....

  • rate this
    0

    Comment number 286.

    Whoopy do.

    I honestly couldnt give a monkeys anymore. It can Dipadedoda up an down like a yo yo.

  • rate this
    +2

    Comment number 285.

    Its not rocket science Ozzy, Plan A has not worked, problem being you have no Plan B.

  • rate this
    +12

    Comment number 284.

    [205.Giles Jones] That was Labour's way of reducing unemployment and creating jobs, create a superstate of public sector workers.

    When are people like you going to realise that the public and private sectors are intertwined and benefit from each other. Attack one and you damage the whole economy and take money out of the system that we all benefit from such as investment in infrastructure.

  • rate this
    +1

    Comment number 283.

    a.k.a. depression...

  • rate this
    +2

    Comment number 282.

    178 Unproveable statement, just political spin which you have fallen for. Whilst Cameron promised the NHS would not face cuts - Labour made no such promise at the last election, their own budget plans contained in the Treasury books indicated severe cuts during this parliament even though they deliberately made no mention of it.
    It cannot be know where we would be now had things been different.

  • rate this
    +5

    Comment number 281.

    Osborne is perhaps hoping for three in a row so he gets the bonus marks?

  • rate this
    +1

    Comment number 280.

    Obviously the boom of the Brown/Bliar years is expected all the time. A bought boom, borrowed money that we have to pay back, or we go bust. It doesn't take 5 minutes to get back to back. We still rely on trade with Europe.
    We need to trade with the rest of the world more and rely less on building houses there isn't space for.

    Blair's mass immigration was a good thing, was it?

 

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