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 579.

    "firemensaction
    At the turn of the 20th Century, Britain decided on.new technology...Dreadnoughts!
    One was built in 4 years, while Germany built 4 in the same time."

    Not true. HMS Dreadnought took just 366 days to complete and enter service. The UK outbuilt Germany in dreadnought production upto WW1. However, the Battle of Jutland showed they were obsolete and a huge waste of money.

  • rate this
    -5

    Comment number 578.

    Only the people in jobs will worry about this, everyone on benefits will still be sitting pretty.

  • Comment number 577.

    All this user's posts have been removed.Why?

  • rate this
    +2

    Comment number 576.

    Until we as a Nation are weaned off the breast of '' Entitlement '' then of course we will never recover.
    Some are so imbued with this sense of '' Entitlement '' They spit their venom and rage even now
    when all can see we are broke.. The Milk of Luxury and the Nectar of Idleness has dried up.
    It will not come back get used to it !!

  • rate this
    +19

    Comment number 575.

    If I ran my company in the same slapdash, incompetent way that these amateurs run the UK I and my board would be out on our collective ears and rightly so. Is there no real requirement for some level of proficiency or ability when running a country's economy? What a terrifyingly amateurish bunch of over privileged, nincompoop yahoos we've allowed into No10. I really do despair of them.

  • rate this
    -2

    Comment number 574.

    USA is set to build nearly 750,000 houses this year. U.K will be lucky to build 100,000. There is very little stimulus from this gov. into any industry. This gov. are supposed to be pro business.
    One thing I would wage my house on, if labour had the reigns things would be even worse!

  • rate this
    +5

    Comment number 573.

    Well I hope you're proud of yourself Nick Clegg for jumping into bed with your Tory friends. You've taken this country into another recession, maybe DC will give you a knighthood for doing what Tory politicians always do, look after the rich and don't give a damn about anyone else. You've really made the grade. Oh how convenient the elections are coming up how many more seats will you lose Nick?

  • rate this
    0

    Comment number 572.

    548. oh_look_the_writing_was_always_on_the_wall

    Of course you all know what comes next don't you?

    WAR.

    Better start preparing - they will find an excuse,
    -----------
    Shift to the left in Euro politics, public disorder, military takeovers backed buy covert US ops or is that regime change.......bankers will need to find a safe neutral country.

  • rate this
    -3

    Comment number 571.

    The Answer will be. Create more public sector jobs and an even bigger government. That is exactly what our friends in France are going to do when the incumbent Mr Sarkozy leaves office. It's got as much chance of working as Le Pen winning the presidential election.

  • rate this
    -2

    Comment number 570.

    Makes me laugh to hear Labour crowing! They seem to forget who created a great deal of the problems that we now have to face. They should sit down in a corner and be quiet. It is only we, the public, who have the right to criticise. The government need to listen and reduce fuel duty, so that people can start to do things and spend money on things other than filling the car up!

  • rate this
    -1

    Comment number 569.

    559.nickdutch

    Interesting thought - not posted before on HYS (to my knowledge). I would suggest it would legitimise their low tax rate though at little benefit. If the jobs were needed anyway they would happily say it was for the tax benefit or they would not need the staff. - just my initial thought but a good idea to think on, thx

  • rate this
    +6

    Comment number 568.

    .... or as it is known amongst the rich and powerful, *Carry on as normal and watch the poor people squirm, because that's what we do*

  • rate this
    +3

    Comment number 567.

    I can't even feel the double dip recession. What I feel from the politicians is 'Yeah but, No but, Oh yeah but' What recession!!!

  • rate this
    +5

    Comment number 566.

    I may have missed it, but has "Tsunami of Logic" been waxing lyrical about what a great job Osbourne is doing?

  • rate this
    -2

    Comment number 565.

    0.2%....0.2%.....OMG.......NOOOOOO!! We're all doomed. Get a life people. A bunch of overpaid quangos input a small amount of figures into a computer and as a result calculate that Britain should start panicking. These figures get revised, and are meaningless. The economy is what it is and fluctuates the same way as house prices, shares and commodities do. IGNORE!!

  • rate this
    -4

    Comment number 564.

    At the turn of the 20th Century, Britain decided on.new technology...Dreadnoughts!
    One was built in 4 years, while Germany built 4 in the same time.
    Fast forward to 21st century. Carriers delayed cos MOD keeps changing spec. on carrier and aircraft!

    So nothing it seems has changed since the dreadnought building race in 1900!
    THAT is why UK in mess today!
    Perhaps if we let the US Dept of Defese

  • rate this
    +4

    Comment number 563.

    We are in a double dip recession? Homeless familys up food banks in every city ,and unemployment up again, But the Government just gave away a large amount of our tax money to I.M.F. Mr G Osbourne must be right or they would sack him?

  • rate this
    +4

    Comment number 562.

    If you prescribe spending cuts so heavily that it becomes a mantra negitivity builds.

    Also with the only nationalised business being banking it's rich looking after rich.

    What hope does our manufacturing sector have if Labour's aim was 50% school leavers to uni forgetting they were forged by manual workers and no emphasis on apprenticeships.

    The European problem is one of detachment by MP's....

  • rate this
    -2

    Comment number 561.

    Ed Miliband: "Arrogant, posh boys just don't get it" - He's right, The Ed's don't get it at all!

  • rate this
    +1

    Comment number 560.

    PANDORA.

    You ask how long it will be before we are fighting over a loaf of bread in the shop.

    People in britain will be fighting over food just after the eurozone collapses as the UK gets 50% of its food from there.

    They will feed themselves before they feed us, this is the reason you are seeing people talking about getting prepared for what is coming.

    The eurozone collapse is a definite.

 

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