26 Jan

Britain exits longest recession on record - just

Britain exits longest recession on record - just

Following great speculation in the news ahead of economic figures released today it has been announced that the UK has finally emerged from the longest recession in modern history - by the sink of its teeth!

The Times reports "Britain emerged today from the longest recession in modern history, but the economy grew by only 0.1 per cent between October and December — far below expectations of a 0.4 per cent rebound.

Today’s figure is only the first of three readings of GDP for the fourth quarter by the Office for National Statistics (ONS).

The reading is so low that a downward revision could leave the country still in recession.

Joe Grice, the chief economist for the ONS, noted that recent revisions up or down had been between 0.1 per cent and 0.2 per cent.

Britain is the last big economy to emerge from a full-blown downturn. The United States, Japan, China, Germany and France all climbed out of recession in the third quarter, between July and September, last year.

A change in GDP could emerge as the country gears up for a general election, which must be held before June 3, although Gordon Brown is facing calls for a poll as early as March.

The ONS will publish its revised reading on February 26 and a final figure in March.

The Government will have to battle even harder to sustain the recovery.

In 2009 the economy fell by 4.8 per cent, the fastest pace of decline in a single year for 88 years, and more than in any other 12-month period since the Great Depression of the 1930s.

Howard Archer, the chief European and UK economist for IHS Global Insight, said: "This is another desperately disappointing GDP release. While the UK officially exited recession in the fourth quarter of 2009, it could only crawl out.

"This reinforces our suspicion that recovery will be gradual and prone to losses of momentum."

It also added to the likelihood that the Bank of England would keep interest rates at an historic low of 0.5 per cent, at least until late this year.

Mr Brown warned yesterday that the country was still in danger of tumbling back into recession if a Conservative government prematurely withdrew the economic stimulus.

He said: “Policymakers in the United Kingdom must remain vigilant. That is why we are all agreed around the world that we must reduce our deficits steadily, according to a plan, but that we must do nothing this year which would put recovery, growth and jobs at risk.

“The biggest mistake we in Britain and individual countries could make would be to withdraw now from the supportive actions we need for growth and jobs.”

David Cameron, the Conservatice leader, who has promised to hold an emergency Budget if the Tories are elected, said that it was time for Labour to “do the right thing”, and accused the Government of "moral cowardice" in failing to deal with the country's budget deficit.

“Our recession, the great recession, is the longest and deepest since the war and coming out of recession does not mean that our debt crisis is over,” he said.

“In fact, far from it: Labour’s debt crisis is now the biggest threat to our recovery, so we will only get this recovery right if we start right now on a proper debt reduction plan.”

He added: “The Government’s promise to halve the deficit in four years has, frankly, failed to convince those who we need to have confidence in Britain’s economic future.”

In a reference to George Osborne’s proposal to cut tax credits and Child Trust Funds for the middle classes, Mr Cameron spoke of the need for action to show they were serious in intent.

“That means some reduction in public spending plans in this coming financial year,” he said.

The main drivers of the minimal growth in the economy came from the retail and motor sector, both of which have been propped up by Government intervention.

Colin Ellis, European economist at Daiwa Capital Markets, said: "...these sectors will have been boosted by the pre-announced VAT rise in January, and the car scrappage scheme - suggesting that, on an underlying basis, the economy only stagnated at best."

It has raised fears over the strength of the recovery as the VAT rise coupled with the dire weather in January are likely to have hurt high street spending, while the scrappage scheme is due to come to an end shortly. :

Brendan Barber, general secretary of the TUC, said: "These figures show just how fragile the economy is. With the threat of a double dip recession looming large, it would be madness to cut public spending now."