The UK economy faces the prospect of dipping into recession for the third time since the 2008 financial crisis, after preliminary data for Q412 showed that UK gross domestic product (GDP) fell back by 0.3% in the quarter, from an adjusted increase of 0.9% in Q3.
Reports quoted a Treasury spokesman who, commenting on the figures, said: “The official forecast was that the UK economy would contract in the last quarter of 2012 so this figure is not unexpected. It confirms what we already knew – that Britain, like many European countries, still faces a very difficult economic situation.”
Analysts suggested that the loss of the temporary economic boost from the Olympics, reflected in Q3 growth, is likely to have shaved between 0.2 and 0.4 percentage points from UK GDP growth in Q4. A further factor was a 10.2% drop during Q4 in mining and quarrying output – the biggest since records began in 1997 – caused by disruption to North Sea oil and gas fields; estimated to have knocked off a further 0.18 percentage points.
The Bank of England’s (BoE) outgoing governor, Sir Mervyn King, has predicted that the UK economy can expect, at best, no more than a “gentle recovery” in 2013, while the GDP figure for the current quarter is already likely to have been dented by recent wintry weather adversely affecting productivity. Earlier this week the International Monetary Fund (IMF) further trimmed its 2013 forecast for UK economic growth to 1%, from 1.1% predicted last October.
The UK economy has now fared worse in the past five years than in the Great Depression of the 1930s and its weak performance was last exceeded by the years immediately following the end of the First World War. However, the data contrasts with more positive figures on the country’s employment market released on 23 January that showed a record number of Britons in work over the three months to November 2012.
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