Britain is back in recession, according to the latest unwelcome forecast from the Organisation for Economic Co-operation and Development.
The UK economy shrank at an annual rate of 1.2 per cent in the final three months of 2011 and will contract by 0.4 per cent in the first quarter of this year, it said. Two successive quarters of economic contraction is the technical definition of a recession.
Some ministers are also concerned the problems afflicting the eurozone could return with a vengeance. "There is a lot of concern about Italy and Spain," said one Government source. "They are just entering recession from a period of very low growth, not after a boom, which is dangerous," the source added.
Ministers are also worried that the threatened UK petrol tanker drivers' strike could disrupt the recovery. "We are not out the woods yet," one said.
The forecast of a "double dip" recession follows a downward revision by the Office for National Statistics of economic activity between October and December last year. The ONS said the domestic economy shrank by 0.3 per cent, rather than the 0.2 per cent estimated in February.
The Chancellor George Osborne pointed out that his own fiscal watchdog, the Office for Budget Responsibility, has pencilled in growth of 0.3 per cent for the first three months of 2012.
Andrew Goodwin, a senior economic advisor to the Ernst and Young ITEM Club, said most surveys of business activity since the New Year have been encouraging.
The shadow Chancellor, Ed Balls, warned that any expansion this quarter should not be seen as a sign that the economy is in decent health. "A double-dip recession can and should be avoided. But after 15 months of zero growth under George Osborne, simply avoiding a technical recession is not good news for our economy," he said.Reuse content