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%.

 

More on This Story

The BBC is not responsible for the content of external Internet sites

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +3

    Comment number 759.

    "Hang on a moment! The last recession ENDED at the beginning of 2009. How long does the gap between recession periods have to be before it's not a double? I would have thought three whole years is enough"

    It didn't end. It was merely delayed with quantitative easing and bailouts. The core problem remains. It's definitely the same recession.

  • rate this
    +2

    Comment number 758.

    Cameron is a kid - hes still wet behind the ears and has little experience and no policies to get us out of recession. If you dont invest in people and infrastructure and house building then you are finished and this selfish govt is out of its depth.We dont need posh kids in Downing St we need decency, compassion understanding and democracy and equality.

  • rate this
    0

    Comment number 757.

    Like lots of people, I am waiting for the housing market to recover. Why? If I put my house in the market now, it simply won't sale! A few years ago, anyone could have a mortgage, and now, it is the complete opposite, it is almost impossible to get one! No movement in the housing market, the construction sector gets the hit! Banks, giving mortgages means more interests in your pocket

  • rate this
    +2

    Comment number 756.

    714.Mo Strummer
    " I just want answers from this government. Now."

    unfortunately that will get the 'it's his fault' reply, I think/hope what we all want are workable solutions not answers to our question. Until we the public accept the past has to be left there and look to the future constructively (drop the party politics) all we will get is answers not solutions.

    logging, bye alll

  • rate this
    +5

    Comment number 755.

    Chris Plotts@393

    "Maybe we should all stay positive? It's pessimism that leads to a recession and this country's got a surplus of pessimism."

    It's not pessimism.

    Higher travel costs
    Higher utility costs
    Higher food costs
    etc...
    My wage isn't any higher.

    I'm positive I no longer have surplus money to spend on the extras that would supposedly 'buy us out' of recession.

  • Comment number 754.

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

  • rate this
    -1

    Comment number 753.

    Ed Miliband blames the Conservatives for this recession. I think it's about time that it occurred to him that there might not have been a first recession, let alone a second if his party had saved some money for "a rainy day".

  • rate this
    +2

    Comment number 752.

    They not learning , manufacturing needs to be subsidised ,if banks get hundreds of billions then so should engineering and science . Shops can't move abroad to china but factories can. Its very very simple , subsidise manufacturing and stop foreign take-overs just like the germans,french,americans,japanese,south korea do, they seem to be doing alright.

  • rate this
    -1

    Comment number 751.

    687 The high street shops are never coming back - the internet is killing them off slowly but surely. People need to understand the concept of fixed costs (wages/rent etc) This means businesses do not shut when the last customer stops coming back, they are gone when they have lost 20-30% of the business such they cannot support the fixed costs they have.

  • rate this
    +2

    Comment number 750.

    How long can the nice Mr 'we're all in it together' Cameron keep blaming the previous administration?

  • rate this
    +1

    Comment number 749.

    @725 Concerned Citizen

    "real terms".

    Oh I love that expression. Every time I hear it it it instantly gets translated to "Move the goal posts another foot to the right please.".

    Many economists have stated many times that the cuts in the public sector amount to 30%. So who is lying to us?

  • Comment number 748.

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

  • rate this
    +1

    Comment number 747.

    Double dip,
    well i never, what do you expect when you cut every thing and talk the ecconomy down.

    ELECTION NOW before its too late

  • rate this
    +2

    Comment number 746.

    The plan for the elite to flees the EU countries is coming along well. First they create a problem (derivatives), then hold the countries to ransom = bailout package even though it's their debt! Finally they will offer the solution by announcing a world Gov starting with the UN......no matter what way you cut it we are re-arranging deck chairs on the titanic!

  • rate this
    +35

    Comment number 745.

    I have worked for over 25 years in the construction industry as a quantity surveyor (20 years Chartered).
    I have been made redundant on 4 occasions in the last 20 years and usually walked straight into another job.
    Since June 2010 I have only found work for 10-15 hours a week.
    This recession may only be about half way through it's cycle with another 2 years to come.

  • rate this
    +1

    Comment number 744.

    Cut public spending deeply to reduce deficit because of borrowing too much tell businesses to borrow more to grow result recession...Osbonkernomics!

  • rate this
    0

    Comment number 743.

    700.oh_look_the_writing_was_always_on_the_wall

    O.K.lets start then..
    Abolish all welfare, this to include all benefits, and also benefits to overseas dependants in Asia and others
    Sack all Govt employed translators used for Benefit etc. and any and all funding to Welfare Rights Organisation like P.W.A.
    Stop any and all Govt cash to all Religious Groups.
    Cancel all over seas Aid..more ?

  • rate this
    +2

    Comment number 742.

    Good job we lent the IMF that £10 billion before this news broke. Has Call me Dave any more trips planned to developing countries? He might borrow a bit to help them out.

  • rate this
    +1

    Comment number 741.

    729.
    Will London
    ___

    You also have a very short memory. ALL gov'ts for around 300 years have continually increased the UKs debt (thus ALL have spent the money than they had and more). One party alone is not to blame, the whole system is to blame. Labour AND Conservative. There is only one party! "They're all having a party, and you're paying for it". (not my words, but very true)

  • Comment number 740.

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

 

Page 30 of 67

 

More Business stories

RSS

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.