Britain out of recession, says NIESR

Worst economic downturn since 1921 saw GDP decline by 4.8 per cent last year

Britain's worst economic downturn since 1921 is finally over, a leading economic think-tank said yesterday.

The National Institute of Economic and Social Research (NIESR) said Britain had contracted by 4.8 per cent in 2009 and described the downturn as "a depression". That contraction is the worst for 90 years, and more severe than in any single year of the Great Depression.

However, the NIESR said that in the last quarter of the year the economy grew by 0.3 per cent following the 0.2 per cent fall in the third quarter, which caught many economists by surprise.

Despite the improvement, the institute is still predicting a slow and grinding recovery, a forecast given weight by official figures yesterday which showed that manufacturing stood still in November for the second month running, when forecasts had been suggesting modest growth.

An improvement in oil and gas extraction meant that production grew 0.4 per cent from October to November.

Further concerns about how sustainable a recovery will be were prompted by Germany. Official figures showed that after modest growth in the third quarter, the economy ran out of steam in the fourth quarter, falling close to zero. It meant that for the year as a whole the German economy suffered a record fall of 5 per cent.

Britain, however, is the last of the world's major economies to come out of recession, if the NIESR's figures chime with figures from the Office for National Statistics. Its hotly anticipated first estimate for the fourth quarter will be published on 26 January.

Britain's economy has shed 6 per cent of GDP since the first quarter of 2008, and that makes the recession the deepest since annual records started in 1955.

The NIESR's quarterly projections have a standard error of between 0.1 and 0.2 per cent when compared with the initial estimates produced by the ONS. The institute said: "The broader picture of the depression is that output fell sharply for 12 months until March and has not changed very much since then, although evidence of a recovery is starting to emerge."

The NIESR is suggesting that the recent resurgence in house prices will come to an end next year and that nervous consumers will continue to save money and pay off debt amid the ongoing uncertainty over unemployment and the possibility of a second recession in the new year, the much-feared "double dip".

It added: "The recovery will be weak because consumer spending, housing investment and business capital spending will carry on falling in 2010, though by much less than this year. Private consumption will decline by 1.1 per cent despite rising disposable income as households save more; the saving ratio will rise from 1.7 per cent in 2008 to 6.1 this year and 8.9 in 2010. The further rise in saving next year occurs partly for precautionary reasons as unemployment continues to rise but it also reflects continued falls in housing wealth as house prices resume their decline."

Moody's, the credit agency, warned that the next government "was likely to tighten fiscal policy very sharply indeed once the elections are out of the way," regardless of its political hue.

It also noted that the Bank of England's quantitative easing programme was coming to an end and thereby its effective monetisation of Britain's budget deficit.

"It will be interesting to see what happens to gilt yields when the Government has to fund its large deficits in the market again," Moody's said.

Despite this, its grimmest predictions were reserved for smaller countries such as Greece and Portugal.

6 per cent

The NIESR's estimate of the total contraction during this recession.

A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
Dawkins: 'There’s a very interesting reason why a prince could not turn into a frog – it's statistically too improbable'
newsThat's Richard Dawkins on babies with Down Syndrome
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
Life and Style
This month marks the 20th anniversary of the first online sale
techDespite a host of other online auction sites and fierce competition from Amazon, eBay is still the most popular e-commerce site in the UK
Arts and Entertainment
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Quantitative Analyst (Financial Services, Graduate, SQL, VBA)

£45000 per annum: Harrington Starr: Quantitative Analyst (Financial Services, ...

Application Support Engineer (C++, .NET, VB, Perl, Bash, SQL)

Negotiable: Harrington Starr: Application Support Engineer (C++, .NET, VB, Per...

AIFMD Business Analyst / Consultant - Investment Management

£450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...

Business Analyst Solvency II SME (Pillar 1, 2 & 3) Insurance

£450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home