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
    +45

    Comment number 319.

    Double-dip recession..well I blame myself for not panic-buying enough petrol like that nice millionaire Mr Maude told me to. True, I can't afford a car, but we're all in this together aren't we?

  • rate this
    -1

    Comment number 318.

    Andy_Pandy I think if you have a word with little weed she will tell you it is a global recession not just confined to the UK.

  • rate this
    +1

    Comment number 317.

    Cameron has madeno differenc he has made it worse .he musyt get rid ofandexchequer who fantisises

  • rate this
    +3

    Comment number 316.

    Drive a stake through Adam Smith's heart! (No, not the one who has just resigned but the 18th century one.) He described a world that no longer exists. Unfortunately George Osborne seems to think it does.

  • rate this
    -2

    Comment number 315.

    Whilst media, financiers and politicians delude themselves by applying 'weather forecast' terminology to economics, they set the framework for failing to meet their obligations to actually DO something about it! Economics are man-made.

    If a weather forecaster says it will rain, your only recourse is a brolly. If an economic forecaster says recession, get off your butt and do something about it!

  • rate this
    +5

    Comment number 314.

    272.
    Whitefall
    ___

    The assumption that banks use peoples savings to fund loans is completely wrong though, it's the way banking SHOULD work, however not a reality.

    As others have said, try blaming all this on one party and you lose the argument. The whole political establishment is guilty (ie all parties) for selling out to "certain interests".

  • rate this
    0

    Comment number 313.

    I like how people in these comments seriously believe that the government is going to save them, as if re-electing labour would somehow make all the deficits disappear.

  • rate this
    +4

    Comment number 312.

    I expected the economy to go back into recession due to the coalition's economic policies, which do not promote growth and cause a lot of unemployment. The coalition has cut too fast and too severely and this double dip recession is very predictable. The coalition's economic policies have been very bad for the country and for individuals lives- they have caused a lot of personal misery.

  • Comment number 311.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +4

    Comment number 310.

    double dip is s ruse.

    We Are Still In A depression - rising unemployment and high inflation - value of money falling and still falling

  • rate this
    -6

    Comment number 309.

    If the media are going to keep talking about recession then it's going to get worse. The economy is based on confidence and talking it down is going to send it into a downward spiral. The media has a responsibility to put out positive stories to help lift the economy back up.

  • rate this
    +2

    Comment number 308.

    219.AndyPandy

    18 Minutes ago

    L is for Labour, L is for Lice.

    =========================
    You need to get out of the toy box more often and see real life. Playing in confined spaces with Teddy and Looby Loo is affecting you badly.

  • rate this
    +2

    Comment number 307.

    Recession = Depression.

    I wonder what is going to happen to the figures once the eurozone collapses, shouldnt be to long now as the only thing keeping it going is lies and corruption. Much the same as the UK really.

    We are about to see the biggest financial disaster the world has ever seen. Western civilization is going back to the old days.

    Debt slavery is almost upon us.

  • rate this
    +2

    Comment number 306.

    259. OnlyDrinkCachaca

    Keynesian economics fell away in 1970s. Replace by Friedman, as advocated by Regan and Thatcher.

    Since 2007, Keynesian theories are seeing a resurgence, because of the mess Friedman's theories made of the markets. He assumed that the markets were rational and self regulating, where as in reality, they are irrational and propagate positive feedback, hence boom and bust.

  • rate this
    +8

    Comment number 305.

    Kill the public sector and you kill the economy! All this stuff about the private sector driving growth is absolute nonsense! Get more money into public sector workers pockets and they will spend and drive growth!

  • rate this
    +3

    Comment number 304.

    Since the petrol/deisel scare scam increased sales at the pumps the recession is probaly worse than the figures show. My Gas/Electricity/Water/Council tax/rent/food have all increased in price so, on a fixed income (no increase for the past 3 years) I am spending less just to exist.

    Not sure about recovery, it can only get worse

  • rate this
    0

    Comment number 303.

    0.2% is the difference between £100 and £99.80. Big deal.

    The actual figure is insignificant. The damage is done by the BBC-led media's hysterical over-reporting.

  • rate this
    -2

    Comment number 302.

    Are right questions being asked? Lord James Blackheath gave a trillion-dollar revelation in Senate; Who listened? Who started an inquiry? Is it that politicians know what to do, but do not want to do it - somewhat akin to Leveson Inquiry? And that this unwillingness has collusion with huge investment banks? Watch:
    http://www.youtube.com/watch?v=eL5hqvTWkYg&feature=player_embedded

  • rate this
    +2

    Comment number 301.

    All these people saying we need to spend more clearly have no idea what the word defecit means. We have been - and still are - living beyond our means.

    If you want the UK to spend more then start by saying how we pay for it. The govt has already been printing money so if you know something they dont, speak up!

  • rate this
    0

    Comment number 300.

    Great why do i get the feeling that something very big is happening but we've lost the will to care?

 

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