(AFP) – May 25, 2012
LONDON — Britain's recession is deeper than first thought according to revised official figures that show the non-eurozone nation's economy shrank 0.3 percent in the first quarter.
A second estimate of gross domestic product (GDP) for the January-March period compared with an initial reading of minus 0.2 percent, the Office for National Statistics (ONS) said in a statement. Analysts had forecast no change.
The British economy is in recession, defined as two successive quarters of contraction, after it also shrank 0.3 percent in the last three months of 2011.
"Today's release is bad news for UK policymakers as it shows the economy faring even more badly than initially thought," said economist Scott Corfe at the Centre for Economics and Business Research, an independent consultancy, on Thursday.
"Indeed, the latest data show the UK economy performing worse than the eurozone economy, which saw zero growth at the start of the year -- meaning the UK's woes cannot even be fully attributable to the debt crisis embroiling the continent."
Prime Minister David Cameron's spokesman insisted that it was difficult for the British economy to grow when much of Europe was struggling amid the debt crisis.
"What the figure confirms is that it is a very difficult economic situation and we will take time to recover from the biggest financial and debt crisis in our lifetimes.
"We have always made clear ... that if the rest of Europe doesn't grow it would prove hard to avoid a recession here in the UK. We cannot be immune from what is happening on our doorstep," the spokesman added.
The main opposition Labour party argues that the economy has been harmed by the coalition government's austerity drive.
The International Monetary Fund warned this week that the government should be ready to cut taxes and increase infrastructure spending if needed, while also praising the policy of heavy spending cuts.
The IMF, which predicts the economy will return to modest growth in the second half of this year provided Europe's crisis eases, added that the Bank of England should consider cutting further its already record-low interest rates.
On Thursday, the ONS also reported a slowdown in household spending, which increased by just 0.1 percent in the first quarter, compared with 0.4-percent growth in the final three months of last year.
Household expenditure has been hit by high inflation, sluggish wage growth and soaring unemployment.
However, government spending surged by 1.6 percent in the biggest increase since the first quarter of 2008, lifted by spending on health and defence.
On an annual basis, the ONS said that GDP was revised down to show a fall of 0.1 percent in the first quarter.
Deputy Prime Minister Nick Clegg, who leads junior coalition partners the Liberal Democrats, said the growth data was "very disappointing."
He also told reporters during a visit to Berlin: "I think it is the moment to really shift up a gear to ensure that as we maintain market confidence in our plan to balance the books and to rid the United Kingdom of our structural deficit, that we do more to use the credibility that we've got... to act as a huge guarantee to mobilise more investment."
Britain escaped a deep downturn in late 2009 but fell back into recession in the final quarter of 2011 on the back of state austerity and the debt crisis in major trading partner the eurozone.
Britain's Conservative-Liberal Democrat coalition administration has axed public spending and hiked taxes since it won power in 2010, after inheriting a record deficit from the previous Labour government.
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