UK economy suffers 0.5% contraction

 

The UK's economy suffered a shock contraction of 0.5% in the last three months of 2010, figures have shown.

 

The severe weather hit activity in the quarter, but the Office for National Statistics (ONS) said even if the weather impact had been excluded, activity would have been "flattish".

 

The Chancellor, George Osborne, said the numbers were disappointing.

 

But he added the government would not be "blown off course" from its austerity programme.

 

The figures are set to raise concerns over prospects for the economy, with large public spending cuts expected to come in this year.

 

The BBC's economics editor Stephanie Flanders said people were right to worry about where the UK's growth would come from in 2011, especially as higher-than-expected inflation had dealt a further blow to household budgets.

 

The contraction follows four straight quarters of growth.

 

The release is a first estimate for the quarter from the ONS and is subject to revision. The statistics body will publish two further updates at monthly intervals.

 

 

'Horrendous'

 

The contraction took economists by surprise, as forecasts had been for growth of between 0.2% and 0.6%.

 

The construction industry was a large contributor to the fall, with activity decreasing by 3.3% in the quarter.

 

"This is a horrendous figure. An absolute disaster for the economy. We knew that retail sales were heavily affected and that services output would be weak, but the collapse in construction was a major contributor to the downside surprise," said Hetal Mehta from Daiwa Capital.

 

"While today's GDP figures are backward looking, they are nevertheless crucial to understanding the resilience of the economy to shocks. It seems that the economy is incredibly vulnerable. And with the fiscal tightening yet to fully bite, we will have to brace ourselves for a bumpy ride."

 

The sector that saw the most growth was manufacturing, which expanded by 1.4%.

 

"Manufacturing remains the one bright spot on the landscape clouded with uncertainty but there are widespread challenges at home and abroad that could still dent growth this year," said Jeegar Kakkad from the manufacturers' organisation, the EEF.

 

 

'No question'

 

The chancellor blamed the severe weather for the weak figures, but said he had no intention of changing his programme of cuts to public spending.

 

"These are obviously disappointing numbers, but the ONS has made it very clear that the fall in GDP was driven by the terrible weather in December," Mr Osborne said.

 

"There is no question of changing a fiscal plan that has established international credibility on the back of one very cold month. That would plunge Britain back into a financial crisis. We will not be blown off course by bad weather."

 

But shadow chancellor Ed Balls said the figures were a matter of "great concern" and due largely to the speed and scope of the coaltion government's deficit reduction programme.

 

"The fact is the recovery has completely stalled in the last three months of last year. This is an economy which was growing in the middle of the year, which has now ground to a halt," he said.

 

"We have inflation going up, unemployment rising, now the economy not growing. And all those boasts from George Osborne and David Cameron that they'd secured the recovery - it seems as though the opposite has happened."

 

 

Rates dilemma

 

Sterling fell sharply following the announcement from the ONS, dropping more than a cent against the dollar to $1.5770.

 

The weak figures also highlight the dilemma facing the Bank of England, which needs to tackle above-target inflation but is reluctant to raise interest rates when the UK's economic recovery is still uncertain.

 

"The MPC [Monetary Policy Committee] must abandon any early interest rate rise until the recovery is more secure," said David Kern, chief economist at the British Chambers of Commerce.

 

"On its part, the government must ensure obstacles that hamper businesses in their efforts to create jobs, invest and export must be removed."

 

Meanwhile, separate figures from the ONS showed that public sector borrowing came in at £16.8bn in December, down from £21bn a year earlier, and some way off the record £23.3bn reached in November.

 

The figures exclude the impact of financial interventions by the government, which reduce overall borrowing because of profit contributions from the part-nationalised banks.

 

The British Chambers of Commerce said the latest borrowing figures indicated an improvement but said the UK's deficit was still "unacceptably high".

 

Interesting Osborne failed to notice that growth would have been pretty much zero even despite the weather...

Interesting Osborne failed to notice that growth would have been pretty much zero even despite the weather...

 

Osborne's a total idiot, a posh tw@t who has no idea of what his policies mean for the ordinary workers of this country... Using "the weather" as an excuse is just pathetic... Pretty sure Germany and Poland had some extreme weather too...

 

Welcome to the "Double Dip Recession" folks....

and so it begins.

 

I wonder what will be blamed next quarter when the results put us in a double dip?

Oh dear. Here we go again...

and so it begins.

 

I wonder what will be blamed next quarter when the results put us in a double dip?

 

Hmmm, more than likely the massive protests and public sector strikes that are gonna boot the Coalition up the arse in the next few months... They'll blame anything but the fact that they have completely misjudged this whole assumption that the Private Sector can absorb massive Public Sector job losses....

When the recession first hit about 2 years ago it was the building and decorating trade that first took the big hits and many big companies went under as well as smaller one. As I work in that trade I saw it very early on. And I can say confidently since mid December it has again slowed right up to a crawl and many of my customers are struggling to find work and looking at laying off workers wh have only just got back to work. Spending money on your home is among the first things you cancel if times are hard. I'm getting Deja Vu

And this is all BEFORE the VAT rise and most of the government's spending cuts bite... Osborne's arrogant boasts that "Britain is out of the danger zone" are going to come back to bite him.

 

The Labour government handed on an economy that was growing strongly and with unemployment falling quickly. Now, we're the first economic powerhouse to experience a contraction since 2009, and unemployment is rising again. Well done Gideon.

It took over a decade for Gordon Brown's "no more boom and bust" to be exposed as undeliverable. It's taken less than ten months for Osborne's arrogant nonsense to be exposed for what it is.

It took over a decade for Gordon Brown's "no more boom and bust" to be exposed as undeliverable. It's taken less than ten months for Osborne's arrogant nonsense to be exposed for what it is.

 

Pretty much, but that still doesn't excuse Brown, he made some very serious mistakes.......

TBH, the Tory Boys are now blaming this on the weather, pathetic IMO, people will of effectively stockpiled, or bought as the snow and ice cleared, like many round here did.

 

3 weeks of cold/snow (25 Nov - 8 Dec and 17 Dec - 25 Dec), is not why an economy seemingly growing has went down a stunning 0.5%, especially during the XMAS period, I dread to think of the possibillities of the next year at least, probably more, could be quite a bad double-dip recession...

 

 

There's no doubt that the weather will have had some effect. However, I can;t see it being the difference between positive growth (or zero growth at best) and a 0.5% decline. No doubt, if the current quarter also shows negative growth, Osborne will blame it on something like unusual sunspot activity.

I sense Labour will be crying all the way to Number 10 after the next economic figures come through. Tax cuts or no tax cuts, a double dip (and possible subsequent downgrading of our debt) really would be the ERM moment for this government.

Its not a shock, Slimy Tory bast*rds look at what they are doing <_<

Double post sorry.

Edited January 25, 201114 yr by JAM123

Pretty much, but that still doesn't excuse Brown, he made some very serious mistakes.......

Yes he f***ed up. But they were doing a lot better at fixing the mess they made than the Torys are, given that they've said they've cleaned it all and in reality they've made it far worse and crippled an entire generation.

 

 

Edit: I don't see what was shocking about the negative growth. Even the dead knew it was coming, anyone with even the most basic basic basic grasp of economics [supply/Demand] should have been able to see that we were f***ed the second George Osbourne walked into the treasury.

Its not a shock, Slimy Tory bast*rds look at what they are doing <_<

 

Agreed... As much as I'm loathe to admit it, Darling's policies were actually showing some improvement to the economy, and I am certainly no defender of the previous "Labour" administration (who, as far as I'm concerned, were just slightly watered-down Tories in a lot of ways...).

 

And get Mervyn bloody King too - "oh, you just have to put up with your living standards getting worse"... Yeah, easy for you to say Merv, it aint you being put on the scrapheap or having to make the choice of whether you feed yourself or stay warm in Winter, you b'astard.... <_<

I think Obama must've seen these figures before he delievered his State of the Union address yesterday:

 

"Cutting the deficit by gutting our investments in innovation and education is like lightening an overloaded airplane by removing its engine - it may feel like you’re flying high at first, but it won’t take long before you’ll feel the impact."

 

I think Obama must've seen these figures before he delievered his State of the Union address yesterday:

 

"Cutting the deficit by gutting our investments in innovation and education is like lightening an overloaded airplane by removing its engine - it may feel like you’re flying high at first, but it won’t take long before you’ll feel the impact."

 

Brilliant :D the man is a star, isn't his approval rating back above 50% as well?

"Cutting the deficit by gutting our investments in innovation and education is like lightening an overloaded airplane by removing its engine - it may feel like you’re flying high at first, but it won’t take long before you’ll feel the impact."

 

 

:lol: :lol: :lol:

 

Almost reads like a direct address to the tosser currently residing in No 11 Downing St doesn't it....?

UGH TORY bast*rdS. George Osborne (I think he's the right guy im on about) Was frigging smiling on the news when he found out about the figures. WTF. We all in this together? Obviously not.