Britain in recession – forecasters
As economic forecasters warn that Britain is likely to be in recession, Chancellor George Osborne says the government is doing what it can to “weather the storm”.
The Centre for Economics and Business Research (CEBR) and the Ernst & Young ITEM Club believe growth was negative in the last three months of 2011 and will continue to be in the first quarter of this year. A recession is two quarters of declining gross domestic product.
The independent Office for Budget Responsibility (OBR), whose forecasts are used by the government, believes Britain will avoid a recession, but experience three months of negative growth.
The CEBR says the economy is likely to have contracted by 0.9 per cent in the last quarter of 2011 and will contract by 0.1 per cent in the first three months of 2010. The ITEM Club expects contractions of 0.2 per cent and 0.15 per cent.
Gloomy forecasts
Their gloomy forecasts are in line with those from other organisations. The OECD think tank forecasts that the economy shrank in the last quarter of 2011 and will decline in the first three months of 2012.
It predicts that the British economy will contract by 0.1 per cent this quarter and 0.6 per cent in the first quarter of next year, with overall growth of 0.5 per cent in 2012. Capital Economics is predicting negative growth of minus 0.5 per cent in 2012.
The CEBR has revised down its growth forecast for 2012 from plus 0.7 per cent growth to minus 0.4 per cent, “with a risk of a more serious decline of 1.1 per cent if developments in the eurozone are especially negative”. But the ITEM Club expects growth across the whole of 2012 of 0.25 per cent.
In November, the OBR said it expected the economy to grow by 0.9 per cent in 2011 (down from 1.7 per cent in March) and 0.7 per cent in 2012 (down from 2.5 per cent).
‘Weathering the storm’
George Osborne told BBC Radio 4’s Today programme: “I’m confident the British government is doing everything it can with a very difficult inheritance, facing a very difficult international situation to get Britain through this, to weather the storm.”
We are going to have to wait until this summer before there are any signs of improvement. Prof Peter Spencer, ITEM Club
Professor Peter Spencer, chief economic adviser to the ITEM Club, said: “Figures for the last quarter of 2011 and the first quarter of this year are likely to show that we are back in recession and we are going to have to wait until this summer before there are any signs of improvement.”
But Prof Spencer said there would not be a deep decline. “It’s not going to be a repeat of 2009. We are not going to see a serious double dip.”
Douglas McWilliams, chief executive of the CEBR, said: “We take no pleasure in outlining such a bleak forecast. But the world is going through a fundamental change where previously poor economies are industrialising fast.”
A Treasury spokeswoman said: “The uncertainty in the euro area continues to have a chilling effect on the UK as well as elsewhere, but there are reasons to be optimistic: business surveys showed the UK service and construction sectors strengthening at the end of 2011, and the government’s credible fiscal plan is helping
Growth forecasts for Britain in 2012
OBR – 0.7 per cent
OECD – 0.5 per cent
ITEM Club – 0.25 per cent
CEBR – minus 0.4 per cent
Capital Economics – minus 0.5 per cent