Britain is in its longest double-dip recession for more than 50 years, according to official figures expected today which will increase the pressure on George Osborne to adopt a "Plan B".
Analysts believe gross domestic product (GDP) shrunk by about 0.2 per cent between April and June, its third consecutive three-month period of contraction. That would be the longest double-dip recession since quarterly records began in 1955 and is believed to be the worst since the Second World War. The last, in the 1970s, lasted only two quarters.
Defending the figures, the Chancellor, inset, is expected to point to Britain's low borrowing costs and to argue that the eurozone crisis is harming UK growth prospects.
Yesterday, Ed Miliband claimed the "tide is turning" in Europe against "austerity and unemployment and towards jobs and growth". He was speaking in Paris after being welcomed by Francois Hollande, the President of France. He overruled official protocol by welcoming the Labour leader on the steps of the Elysee Palace, an honour normally reserved for heads of government.
Mr Miliband, the first senior British politician to visit since May's election, said the two men agreed that a new approach was needed on the economy, especially to tackle youth unemployment. "What President Hollande is seeking to do in France and what he is seeking to do in leading the debate in Europe is find that different way forward," he said.
After his half-hour meeting with the President, Mr Miliband told French Socialist MPs: "Thirty years ago the Labour Party was a party that believed in getting out of Europe. I want to say very, very clearly that we consider Britain's place to be in Europe and firmly in Europe."
Philip Shaw, chief economist at Investec, who predicts a bigger 0.4 per cent fall in GDP, said the figures for the construction sector may be a "disaster", with a drop of as much as 6 per cent between April and June, following a 4.9 per cent fall in the first three months of this year.
Yet the Office of National Statistics figures have been called into question as they are at odds with upbeat industry surveys and employment figures. Some economists say it is a "phoney recession" and worry gloomy official statistics may be harming confidence, a vital ingredient for recovery.
Lord Green, the Trade Minister, yesterday broke his silence on the HSBC money-laundering scandal, expressing regret over "failures" at the bank while he was its chief executive.Reuse content