Britain Back in Recession
Britain’s economy sank back into recession in the first quarter, when it contracted by 0.2 per cent amid ongoing state austerity and the eurozone debt crisis, official data showed on Wednesday.
The British economy has now returned to a technical recession, defined as two successive quarters of contraction, after shrinking by 0.3 per cent in the previous three months, the Office for National Statistics (ONS) revealed.
The data confounded most analysts’ expectations that gross domestic product (GDP) would grow by 0.1 per cent in the quarter from January to March, compared with the final quarter of last year.
The ONS added in a statement that the decline in first-quarter GDP ‒ the value of all goods and services produced by the economy ‒ was driven by a poor performance by the construction and manufacturing sectors.
Britain’s economy had clawed its way out of a record-length recession in the third quarter of 2009 following a downturn sparked by the global financial crisis.
But it has now returned to recession amid painful government spending cutbacks and fallout from the debt crisis in the neighbouring eurozone, which is a key trading partner.
Britain joins a number of eurozone countries in recession, including Spain, and bailed-out nations Greece, Ireland and Portugal.
Overall, the 17-nation eurozone’s output shrank by 0.3 per cent in the fourth quarter of last year, while recent weak data has sparked deep worries that the region is also back in recession.
Highlighting the extent of Britain’s debt strains, official data on Tuesday showed public sector net debt as a percentage of GDP ‒ excluding the cost of bank bailouts ‒ hit a record high of 66 per cent in March.
Britain’s total debt stands at GBP1.022 trillion (EUR1.25 trillion, or US$1.65 trillion), the ONS revealed.
“It’s a very tough economic situation,” Chancellor of the Exchequer George Osborne said on Wednesday following news that Britain was back in recession.
“It’s taking longer than anyone hoped to recover from the biggest debt crisis of our lifetime ‒ even after the recent fall in unemployment.”
“But over many years, this country built up massive debts, which we (have) to pay off. It’s made much harder when so much of the rest of Europe is in recession or heading into it.”
“The one thing that would make the situation even worse would be to abandon our credible plan and deliberately add more borrowing and even more debt,” added Osborne.
The British pound fell against the euro and the dollar on Wednesday, but London’s FTSE 100 index of leading shares held firm in positive territory.
The FTSE was 0.49 per cent higher at 5,737.31 points in late morning deals.
“The double dip in recession comes as no surprise to us. We have been forecasting another recession since last November when the eurozone crisis intensified,” said Schroders economist Azad Zangana.
The recession news dashed market hopes for modest first-quarter growth after retail sales rebounded by a strong 1.8 per cent in March from the previous month.
Recent figures also showed that the number of jobless Britons fell by 35,000 in the three months to February, marking the first quarterly decline in almost a year.