Well it looks as if Britain is heading for its first double-dip recession in 37 years after the economy slumped in the final quarter of 2011 and officials warned of a new threat to many jobs. With almost three quarters of the general public saying they were worried that another recession would have a severe impact on them and their family, while just 13 per cent said they would not expect to be affected it is hard not too worry.
The fresh crisis in Britain’s factories dealt a blow to the Coalition, which has pinned its hopes for recovery on UK industry. The economy’s worse-than-expected performance, which put annual growth for 2011 in line with forecasts at 0.9pc, came as the Bank of England revealed that the private sector is planning job cuts – undermining hopes that it might pick up the slack from the roughly 110,000 public sector redundancies expected this year. Even if the economy does manage to grow in 2012, it’s highly likely that the year will start with a return to recession. We may already be in it given the fall in output at the end of 2011.
And let’s not discount the threat posed by the unstable global markets. The Eurozone debt crisis continues to rumble on, while the US is looking increasingly likely to slide back into recession itself. David Cameron warned that the global economy is close to “staring down the barrel”, while IMF chief Christine Lagarde claimed the global economy has entered a dangerous phase where heavy debt burdens could “suffocate” a recovery.
We’ve already seen £200 billion worth of money rolled out in this fashion and that could be expanded as early as October, when the Bank of England holds its next base rate meeting. Another, more controversial, option would be to cut the base rate from its current record low of 0.5%. The Bank of England’s rate-setting committee caused quite a stir when it revealed that it had discussed the possibility earlier this month.
According to the ONS, manufacturers bore the brunt of the quarterly slump, declining 0.9pc – the steepest fall since the start of the recession in 2008. However, some hope was offered by an improvement in the CBI industrial trends survey for January. Although orders remained below normal, economists said the data suggested the deterioration in the industrial sector had “troughed”.