Recession over, official figures declare
The UK economy has finally emerged from one of its deepest economic downturns.
Preliminary figures from the Office for National Statistics (ONS) showed that in the last three months of 2009 the economy expanded by 0.1 per cent, ending six consecutive quarters of contraction.
However, the rate of growth was well below the 0.4 per cent anticipated by some analysts.
Having shrunk by 6 per cent over the course of the recession, the economy is now 10 per cent smaller compared with the position it would have occupied had the slump not occurred.
Contraction for the whole of 2009 measured 4.8 per cent, the most significant single-year rate of decline registered in eight decades.
The UK had been the last major economy still sloughed in negative growth.
The signs are that, although now in recovery, the UK will require time to regain its former momentum.
The length and depth of the slump marks the most severe downturn since the Great Depression.
A huge public debt and a reluctance among banks to lend to businesses still weigh heavily around the neck of the economy, and a suspicion lurks in some quarters that the feeble push into positive territory has only been achieved through the support offered by the Bank of England in the form of very low interest rates and £200 billion of quantitative easing.
Were that support to be withdrawn prematurely, many experts are predicting that any future growth will be sluggish and fragile.
The UK’s long-term growth trend is 2.5 per cent; given the financial head winds it is continuing to encounter, the economy may grow by just 1 per cent this year.
David Frost, the director general of the British Chambers of Commerce (BCC), welcomed the figures from the ONS but warned that the business community faces a long struggle to claw back its losses.
Mr Frost said: “This is good news, but clearly growth is anaemic, and it certainly means that the economy is far from being out of the woods.
“It is essential that the government demonstrates an unwavering determination to support wealth-creating companies in 2010. Additional business taxes must be avoided, and the 1 per cent increase to employers’ National Insurance contributions, planned for 2011, should be scrapped.”
David Kern, chief economist at the BCC, added: “These figures are disappointing and well below most analysts’ expectations. The main aim now must be to ensure that the modest recovery consolidates and slowly gathers momentum.
“It is critical for both the government and the [Bank of England’s] Monetary Policy Committee to pursue policies that make it possible for business to invest and export. Regulatory burdens must be removed wherever possible, and access to finance improved. A double-dip recession must be avoided at all costs.”