Downbeat economic figures out today confirmed that the UK has slipped further into recession.
Official figures from the Office of National Statistics for the second quarter of this year show economic output fell by a worse-than-expected 0.7%.
Britain tumbled into a second recession in four years at the end of last year and since then official data has shown the economy struggling to recover as the debt crisis in the eurozone and public spending cuts combined and the extra bank holiday to mark the Queen’s Jubilee hit output.
Today's gross domestic product (GDP) figures – for the period between April and June – were forecast to show a 0.2% contraction. The fact that, at 0.7%, they are far worse will set alarm bells ringing.
The figures are likely to increase the pressure on Chancellor George Osborne to bring in further measures to boost the economy on top of steps already taken to get credit flowing to companies and bring forward major infrastructure projects.
Most economists expect a return to growth in the third quarter, as the London Olympics offer a one-off boost.
Some commentators believe the economy is in better shape than the GDP figures show, arguing that recent better-than-expected unemployment figures and business purchasing survey results show early signs of recovery. New jobs announced today at car manufacturer Jaguar Land Rover and at trainmaker Hitachi show UK manufacturing performing better than the official figures.
Phil Smith, managing director of business leadership organisation Business West, which runs Bristol Chamber of Commerce, described today’s figures as “a matter for immediate concern”.
He said: “Continued contraction in the UK economy for the third quarter in a row was widely anticipated. Our latest business surveys and indicators show that business, both locally and nationally, are struggling on a number of fronts. However, the extent of the fall is much bigger than expected.
“Businesses on the ground tell us that it is demand and local spending which is in need of stimulation. Ministers cannot expect firms to grow if they fail to take a long-term approach to creating an enterprise-friendly environment. Strong leadership and imagination is what is needed at the top to steer Britain's recovery away from a double-dip recession. Government must go further on measures to promote infrastructure investment, address the ongoing issue of finance availability and commit to meaningful deregulation.
“This said, we must remember that these growth figures are preliminary estimates, susceptible to revision at a later date. Business confidence is notoriously fickle and companies across the country will be looking towards the upturn benefits of a summer of celebrations, which have the potential to address the current fortunes of the economy.”
Institute of Directors South West region chair Gerry Jones said the figures came as a severe blow to business. “The eurozone countries show that we absolutely cannot afford to waver from the deficit reduction programme, but there are several steps the Government must take to boost the economy through supply-side reforms,” he said.
“New infrastructure projects financed by our low interest rates, proper relaxation of planning and employment red tape, and action to lower energy costs for manufacturers would all show Britain means business. Too often, programmes are moving ahead at glacial speed. To help unlock corporate cash piles, Government needs to show decisive leadership and a real sense of purpose.”
CBI director-general John Cridland added: “These are very disappointing figures. They show there has been a lack of growth in the first half of 2012. When I talk to businesses on the ground, however, the overwhelming view is that right now the economy is flat rather than negative, and there is potential for Britain to get back into growth later in the year.”
