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 899.

    Too much easy credit created the depression we are in.

    This happened because lots of people did not know that when they borrowed 100k from the bank via a mortgage/loan......The bank never had it, the money they gave out didnt exist until it was asked for.

    This is how you create debt from nothing.

    Fractional reserve banking is about to cause the biggest financial crash the world has ever seen.

  • rate this
    -2

    Comment number 898.

    868.Under-Used
    "In 2007, under Labour, and prior to the economic crash/fraud, the UK unemployment figures were the lowest they had been in 22 years.
    Care to explain that away?"

    Very simply - we (not only UK but other countries too, & both govts and consumers) had a big party on borrowed money, & thought it would never end.

  • rate this
    +3

    Comment number 897.

    894. mattmatt81...

    Ah I see its all the BBCs fault, nothing to do with condem policy...

  • rate this
    +3

    Comment number 896.

    2 words...fuel costs. im self employed and have to spend around a quarter of what i earn on petrol. If fuel wasnt so expensive id make more profit and my business would be far better off. I, personally would make more money so may well spend more....boosting the economy. Plus everything is more expensive due to transport costs e.g. food so i cut back even more. Solve the fuel problem .thatl help

  • rate this
    +5

    Comment number 895.

    1950s: Complacent British management don’t invest for long term

    1960s: British industry in trouble

    1970s: Unions wreak havoc

    1980s: Thatcher wipes out industrial base, sells all to foreigners, economy propped up by oil

    1980s-2010s: deregulation + increasing globalism, borrow foreign money to buy foreign goods. Manufacture ever less

    THE END

  • rate this
    -9

    Comment number 894.

    Congratulations BBc you have finaly got your double dip recession .
    You have given any negative story huge coverage whilst burying any positive economic data .This is in stark contrast to the last years of the Brown Regime when the word "defecit " was banned .
    Its one thing to be left leaning but undermining your fee payers economy for the benefit of the labour party is treasonous .

  • rate this
    +2

    Comment number 893.

    858. sprout_2001

    I am still unsure how keeping interest rates low is helping the economy."
    -

    It allows more money to float through the system by keeping household costs (mortgage) down and by reducing the cost of borrowing for businesses, which makes growth easier.

  • rate this
    +2

    Comment number 892.

    The economy has gone over the edge!

    THIS HAPPENED IN 2008 & WOULD HAVE HAPPENED WHATEVER MAIN PARTY HAD BEEN IN, SO CALLED, POWER!

    It isn't about to collapse IT ALREADY HAS & that's just stating the obvious! The Bank of England is propping it up, they wouldn't have to do that if it hadn't collapsed!

    The banks are leveraged to the hilt & have MASS DEBT on their balance sheets...That's THE NEWS!

  • rate this
    -4

    Comment number 891.

    875. AtALossWithIdiots

    What do you suggest we spend? If we carried on spending at the rate the irresponsible selfish labour party were the Bond buyers would have dried up. Who would lend to an out of control economy. We had to curb our spending.

  • rate this
    -1

    Comment number 890.

    It all depend on what sector you work in.
    I have been working in construction for the past 8 years but the industry fell off a cliff in November 2008 and never really picked up again, i was eventully made reduntant in feb this year.
    I am a apprentice train Turner with 25 years experience before i moved into construction. Its taken me 8 weeks to find a new job in engineering on better money.

  • rate this
    -1

    Comment number 889.

    Can we have our aid money back from India too? We need it more than you as you can obviously afford big rockets and are aiding us by starting up a new steel industry in the UK

  • rate this
    +12

    Comment number 888.

    843.FreedomBell

    "Labour created the mess with their endless borrowing to placate their army of benefit claimant supporters."

    A poor excuse. The 2008 banking crash was brought about by dodgy practices propagated by deregulation of the banks in 1980. Everything was built/bought on credit which has now come home to roost. It is a global problem and has nothing to do with Labour's spending.

  • rate this
    +3

    Comment number 887.

    the only people in the world that didnt belive that the country would not go into recession is the government you cannot cut and make people redundant and then expect people to spend. by cutting back to far and to fast the govenment has created this situation. start building affordable homes and any building programmes you can so that the constuction industry is kick started

  • rate this
    -1

    Comment number 886.

    230. shellscript
    >>>Recession, double dip recession, triple dip recession and etc is just the jargon used by the so called financial gurus to cover their incompetence.
    I have to agree. My perception is that the job market this year is a lot more bouyant than it was last year. I think confidence is slightly on the up. Recessions end when people say "Enough" and start taking small risks again.

  • rate this
    +9

    Comment number 885.

    @843 - "we must ignore the vested interests; gravy train has stopped." You really don't understand what Conservatism is all about, do you? It exists only to preserve the vested interests of big business, international finance and inherited privilege.

  • rate this
    +2

    Comment number 884.

    871.
    working Stiff
    ___

    So you benefit from EU welfare! Hippocrite!

    You can take your ideas of what suits you and shove them.

    I'd rather see a world where welfare is not necessary. Where everyone works to help society.

    Instead of that you want a crisis so you can commit an act of terrorism. You are disgusting.

  • rate this
    -5

    Comment number 883.

    868.Under-Used
    ''under Labour, and prior to the economic crash/fraud, the UK unemployment figures were the lowest they had been in 22 years.

    Care to explain that way?''

    Yeah. They presided over the biggest boom and then the biggest bust the country has seen in 100 years. Plus the jobless figures were skewed by the fact they put everyone on DLA and then didn't include them as unemployed.

  • rate this
    +3

    Comment number 882.

    2009 JH goes to America for a meeting with News International
    On his return Murdoch gives his support to Cameron.
    Cameron / Glegg elected
    JH is put in charge of Murdochs BskyB bid.

    Your right Cameron - You're all in it together.

  • rate this
    +5

    Comment number 881.

    Well the proof is in the pudding yesterday there was some very offensive rightwing rhetoric on the HYS about poor people and those claiming housing benefit well whos fault is this now the poor draining the wealth the public sector workers No a Inept stupid dogma of public spending cuts from an unemployable public schiool boy and his band of happy chums .A ship of fools we need long term planning

  • rate this
    +7

    Comment number 880.

    Lets see the Tories blame this one on Labour this time. Their answer to everything has been to point to the mess Labour left us in, what on earth are they going to do now?!

    Ah well, remember, we're all in this together - one big happy society.

 

Page 23 of 67

 

More Business stories

RSS

Features

  • Peaky Blinders publicity shotBrum do

    Why is the Birmingham accent so difficult to mimic?


  • Oliver CromwellA brief history

    The 900-year-story behind the creation of a UK parliament


  • Beer and alcoholAbstinence wars

    The struggle to claim the month of October


  • Image of Ankor Wat using lidarJungle Atlantis

    How lasers have revealed an ancient city beneath the forest


  • Tesco signBest before?

    Has Tesco passed its sell-by date, asks Richard Anderson


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.