Back from the brink? Green shoots of recovery

It's been a year since Britain went into recession, but there are positive signs that things are getting better
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The Independent Online

As we go about our weekend rituals few of us will have any idea that it is the anniversary of a moment when all our lives changed. Perhaps that is understandable. The landmark in question – the start of a year of the worst economic downturn since the Depression – is hardly one to celebrate.

Britain went into official recession on 23 January 2009 after the economy shrank at the fastest rate for nearly 30 years. This week, when the latest economic figures are published on Tuesday, it seems almost certain that we will be free of the "R" word.

With car production soaring, shop sales growing at a rate not seen in almost a decade, home buying at a two-year high, unemployment down and fewer people defaulting on credit, there is scope for a little hope.

A buoyant housing market is a good sign. Even though a relatively small number of deals are being done, house buying seems to be on the increase, with completed home sales hitting a two-year high last month. Provisional figures from HM Revenue and Customs show 104,000 deals involving properties priced above £40,000 were completed last month.

The British Chambers of Commerce said there have been improvements in many areas in its economic survey for the fourth quarter of 2009, most strikingly in manufacturing. Car production in the UK had the greatest rise for 34 years in December. According to the Society of Motor Manufacturers and Traders, it rose 58.5 per cent to 85,316 vehicles.

Shops also saw their best December growth for eight years, according to the British Retail Consortium. Like-for-like sales rose 4.2 per cent by value during the month thanks to a last-minute buying spree by shoppers.

The pressure of debt also seems to be easing for Britons as fewer people default on their loans. Lenders overestimated the number of people who would default on unsecured credit, such as credit cards and loans, last year. In fact, a Bank of England report has said that default rates on unsecured credit fell in the last three months of 2009.

The shrinking job queues are a good sign, too. The number of unemployed fell by 15,200 last month, taking the total to 1.61 million.

Internationally, there are also promising signs from China, whose economy is expanding at an impressive rate. It grew by 8.7 per cent in 2009, exceeding even the government's initial expectations.

In the UK, the home loans market was also "surprisingly strong" in December, according to the Council of Mortgage Lenders. UK mortgage lending increased by 14 per cent in December compared with November, to £13.7bn.

Joanna Cobb, an estate agent from Hereford who was part of the IoS credit crunch panel, said: "More people are getting into the market and there's a good level of increased activity. We've definitely seen an increase in business."

Despite the encouraging signs, not everyone on the panel feels so optimistic. Jacqueline Rice, a pensioner from Peterborough, said: "I think it's going to get worse again before it gets better. The bills go up, but our income doesn't go up. Our help from charities went down with the credit crunch. They have dropped the amount that we get by £15 or £20 a month. We skimp and save."

Although the trend seems to be one of economic improvement, it has not been without its wobbles this week. Bank stocks plummeted following President Obama's plans to curb US banks.

There are also signs that it will take more than an official end to the recession for some people's lives to return to normal. The energy giant E.ON announced it is to lay off 800 staff. Despite last month's favourable unemployment figures, recent projections have suggested that unemployment is likely to continue to rise until a peak of 2.8 million in 2012.

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