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Big freeze threatens UK with triple-dip recession; IT'S 'TOUCH AND GO' WHETHER ECONOMY CAN AVOID SLUMP.

Byline: RHODRI EVANS Assistant Business Editor r

BRITAIN remains on the brink of a triple-dip recession after official figures confirmed the economy contracted by 0.3% at the end of 2012.

The Office for National Statistics (ONS) stuck by its previous estimate for the fourth quarter, although it now thinks the UK economy grew by 0.3% across the whole of last year, rather than previous guidance of 0.2%.

GDP figures for the current quarter are due to be released at the end of April, with the recent cold weather increasing the chances of two successive quarters of contraction, which would represent a return to recession.

The country's stagnant performance reflects a fall in industrial production of 2.1% in the fourth quarter - including a 10.7% slump in mining and quarrying - the biggest fall since the first quarter of 2009.

However, household spending in the fourth quarter increased by more than previously thought, up 0.4% from an earlier 0.2% reading.

Total disposable incomes rose by 2.1% during the year as a whole, but slipped back 0.1% in the fourth quarter.

IHS Global Insight economist Howard Archer said the possibility of an unprecedented triple-dip recession remained very real.

"It looks touch and go whether the economy can avoid further contraction in the first quarter of 2013, and hence a triple-dip recession," he said.

He said heavy snowfall, which has hit parts of the UK in recent days, increased the chances of another quarter of falling output.

The figures also showed a household savings ratio of 7.1%, the highest since 1997, as people choose to save rather than spend. This figure was boosted by a PS20.1bn increase in wages and salaries versus 2011.

The UK's current account deficit shrank to PS14bn in the fourth quarter - worth 3.6% of GDP - from an upwardly revised PS15.1bn in the third quarter. For the year as a whole the UK's current account deficit was PS57.7bn.

The trade deficit - the difference between the value of Britain's exports and imports - widened to PS9.6bn in the fourth quarter, up from PS8.1bn in the previous quarter.

Companies exported 1.6% less goods in the fourth quarter, while services exports fell 1.8%.

PwC's chief economist John Hawksworth said the figures showed the impact of disappointing overseas trade in the past year.

"Net exports were revised up in 2011, but down in 2012," he said.

"There is now an even more marked contrast between 2011, when net exports made a very strong positive contribution to overall growth, offsetting weak domestic demand, and 2012, where domestic demand rose by a respectable 1.4% but net trade knocked over 1% off this figure to give overall GDP growth of just 0.3%.

"As a result, the UK recorded a current account deficit of 3.7% of GDP in 2012 - the fourth largest balance of payments deficit we have seen in the post-war period.

"Domestic demand is likely to remain the dominant driver of growth in 2013, with earlier ambitions to rebalance growth from consumer spending to net exports thwarted in 2012."

Dr Archer added: "This export performance is really disappointing, even allowing for the problems in the eurozone and generally muted global growth, and is a blow to hopes that the economy can rebalance."

The UK's persistent economic weakness has already led to the loss of its prized AAA rating.

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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Geographic Code:4EUUK
Date:Mar 28, 2013
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