26
Jan
UK economy emerges from recession
The UK economy has come out of recession, after figures showed
it had grown by a weaker-than-expected 0.1% in the last three
months of 2009.
The economy had previously contracted for six consecutive
quarters - the longest period since quarterly figures were first
recorded in 1955.
There have been recent recovery signs - last week, UK
unemployment fell for the first time in 18 months.
The UK's had been the last major economy still in recession.
Europe's two biggest economies - Germany and France - came out
of recession last summer. Japan and the US also emerged from
recession last year.
The weak level of growth took its toll on the value of the
pound, which fell against both the dollar and the euro on the money
markets.
'Below expectations'
"We can say that Britain has just crossed the line in coming out
of recession," said BBC chief economics correspondent Hugh Pym.
"It [the growth figure] was below analysts' expectations. The
figure could be moved down, or indeed upwards."
Our correspondent said the move out of recession had been
greatly boosted by the government car scrappage scheme.
Joe Grice, from the Office for National Statistics (ONS), said
the UK's production and service sectors each grew by 0.1% during
the quarter.
The ONS figures also showed that GDP fell by a record 4.8% in
2009.
"The Q4 GDP figures are a major blow to hopes that the UK
economy had emerged decisively from recession in Q4," said analyst
Jonathan Loynes at Capital Economics.
"No doubt some commentators will claim that the figures are
under-estimating the true strength of the recovery and will be
revised up in time.
"That is certainly possible. But it won't change the big picture
of an economy still operating way below both its pre-recession and
trend levels of output."
'Frail' recovery
The UK recession began in the April-to-June quarter of 2008, and
was the longest UK recession on record.
During 18 months of recession, public borrowing increased to an
estimated £178bn, while output slumped by 6%.
After the GDP figures were published, John Wright, chairman of
the Federation of Small Businesses, said that the recovery remained
"frail".
"In order to strengthen the recovery it is important that we
boost consumer confidence and demand and that interest rates are
held steady as continued investment in the economy will be the key
to ensuring a sustainable recovery," he said.
Meanwhile, Lee Hopley, chief economist at manufacturers
organisation EEF, said: "Whilst today's data confirm that
manufacturing is now out of recession, they also continue to raise
questions over the health of the wider economy.
"The trajectory for the recovery, particularly in the next six
months, is an uncertain one and the best prospects remain an
export-driven turnaround."
First estimates of how the economy has performed are made with
about 40% of the data available, and Investec economist David Page
has warned there is "plenty of room for surprises" in the
figures.
But the BBC's Economics Editor Stephanie Flanders said: "Even
with some revision - in fact, even if it turns out that the economy
actually started top grow in the third quarter, given that the
first estimate of a decline 0.4% has already been revised up to
-0.2% - we are still talking about an extremely lacklustre
recovery."
'Staggering'
Chancellor of the Exchequer Alistair Darling said he was now
sure that "we are on a path to recovery.
"I'm confident but I'll always remain cautious".
But Shadow Chancellor George Osborne told the BBC that the UK
needed a "new model of economic growth" under a Conservative
Government.
He added: "Let's be clear - this is about as weak growth as you
can get."
Liberal Democrat Shadow Chancellor, Vince Cable said the markets
would be surprised that growth had been markedly slower than
expected.
"Far from the quick recovery the chancellor has been praying
for, the economy is only just staggering back into growth," he
said.
source: www.bbc.co.uk/news Tuesday
26th January 2010