UK is in recession: Olympics and Jubilee could make it worse
Construction leads slump as Britain enters double-dip recession
THE UK economy has entered recession following two successive quarters of negative growth. The Office for National Statistics announced this morning that GDP fell by 0.2 per cent between January and March. It comes on top of the 0.3 per cent contraction experienced in the previous quarter.
The ONS said output in the service sector, which accounts for 75 per cent of GDP, increased by 0.1 per cent, but it was not enough to cancel out a three per cent fall in construction – the biggest in three years. Manufacturing fell by 0.1 per cent – following the previous quarter’s decline of 0.1 per cent.
The news finally realises the long-held fear that Britain would experience a double-dip recession following the financial crisis of 2008. The UK economy was previously in recession for over a year between 2008-09, although this recession is not expected to be anywhere near as bad.
Chancellor George Osborne defended the Coalition policy of spending cuts, saying: “It's a very tough economic situation. It's taking longer than anyone hoped to recover from the biggest debt crisis of our lifetime. The one thing that would make the situation even worse would be to abandon our credible plan and deliberately add more borrowing and even more debt.”
Some economists believe the ONS figures are too gloomy, The Independent reports. Chris Williamson, chief economist at Markit, said: "The underlying strength of the economy is probably much more robust than these data suggest.
"The danger is that these gloomy data deliver a fatal blow to the fragile revival of consumer and business confidence seen so far this year, harming the recovery and even sending the country back into a real recession."
But others think the economic situation is unlikely to improve in the next two quarters.
Melanie Bowler, an economist at Moody’s Analytics, told The Daily Telegraph that the extra public holiday in June to celebrate the Queen’s Diamond Jubilee is likely to hit second quarter growth hard and that the Olympics might negatively impact the third quarter. Add to that Osborne’s insistence on sticking with severe fiscal austerity and the economy might struggle to grow.