Official: Britain is finally out of recession

After six consecutive quarters of contraction, Britain finally - and with anaemic weakness - emerged from recession in the final quarter of 2009, it was revealed this morning by the Office for National Statistics. However, as one of the last major economies to do so (Germany and France came out of it last summer), Britain's GDP has shrunk more than six per cent.

And it remains uncertain whether Britain is safely out on the path of growth. A Goldman Sachs report last week predicted the economy will grow substantially over the next two years but there are several plausible scenarios that suggest otherwise.

Referring to cuts in public expenditure, City minister Lord Myners tells the BBC there were still "some difficult decisions to be made around balancing the economy". What Myners means, of course, is that the economy may not actually grow but only give an impression of growth through aggressive spending cut-backs.

Nor are the effects of the recession likely to dissipate soon.
Douglas McWilliams, of the Centre for Economics and Business Research, says: "We shouldn't get too over-excited. We may be slightly off the bottom but we're still stuck in the mud."

Growth this year could be just one per cent, compared to three per
cent in the US and 10 per cent in China.

The insolvency body R3 says 2010 will see record company collapses and that the level will remain high in 2011. "The country went into recession sharply but will come out of it through a long, slow drag," Peter Sargent, chairman of R3, told the Financial Times.

Economists fret that as the economy begins to improve, the government has little room to manoeuvre. Treasury coffers are empty leaving no flexibility to reduce taxes or initiate new programmes for growth. Further public sector spending cuts could trigger thousands more redundancies and a much-feared downgrade in Britain's credit rating will push up the cost of borrowing.

Emerging from recession still carries potential political fall-out for
Gordon Brown.

According to the Guardian, Labour strategists fear that the economy could slow again in the first three months of this year. Those figures won't be known until April 23, just 10 days before the anticipated election date of May 6. Conservative strategists believe that fear of a stalled recovery could still persuade Brown to go for an earlier poll.

Nor is the end of the recession necessarily a boon for the government. A Channel 4 opinion poll shows only 12 per cent of voters said the end of the recession would make them more likely to vote Labour, while 72 per cent said it would make no difference in how they voted.

Despite the lingering gloom, emerging from recession is better news than not, says Martin Weale, chief economist at the National Institute of Economic and Social Research. "But the idea that our economic problems have gone away would be a mistake." ·