David Cameron disappointed at Britain's return to recession

 

Britain's return to recession is "very, very disappointing", Prime Minister David Cameron said today, but he insisted the Government will stick to its programme of austerity and deficit reduction.

The Office for National Statistics today announced the 0.2% decline in gross domestic product (GDP) in the first quarter of the year which, after a fall of 0.3% the previous quarter, has triggered the UK's first double-dip recession since the 1970s.

Labour leader Ed Miliband told the House of Commons that the figures were proof that the Government's plan has failed, describing the downturn as "a recession made by the Prime Minister and the Chancellor in Downing Street".

"Over the last 18 months since his catastrophic spending review, our economy has shrunk," Mr Miliband said at Prime Minister's Questions.

"The reality is that it is families and businesses who are paying the price for his arrogance and complacency."

Mr Cameron responded: "These are very, very disappointing figures. I don't seek to excuse them, I don't seek to try to explain them away.

"Let me be absolutely clear. There is no complacency at all in this Government in dealing with what is a very tough situation, which frankly has just got tougher. It is very difficult recovering from the deepest recession in living memory, accompanied as it was by a debt crisis."

He added: "We have got to rebalance our economy, we need a bigger private sector, we need more exports, more investment.

"This is painstaking, difficult work but we will stick to our plans, stick with low interest rates and do everything we can to boost growth, competitiveness and jobs in our country."

A slide in construction output and a stagnant services sector were being blamed today for the decline in GDP.

Responding to the preliminary estimate from the Office for National Statistics (ONS), Chancellor George Osborne admitted the recovery was taking longer than hoped but said he would not change course on his austerity drive.

Experts said the first-quarter figure, which compared with City forecasts for growth of 0.1%, painted an unduly pessimistic view of the economy and there is a danger that the UK's recession tag could damage confidence and prompt firms to rein in spending at a time when growth is needed.

Sterling fell sharply in the wake of the figures, which have opened the door to another round of money printing measures by the Bank of England.

Its governor, Sir Mervyn King, has already warned that the economy might "zig-zag" in coming months, with the Diamond Jubilee and the Olympics also set to distort the figures for the second and third quarters.

The current downturn is expected to be nothing like as severe as the previous recession of 2008/09, which spanned more than a year.

Mr Osborne said: "It's a very tough economic situation. It's taking longer than anyone hoped to recover from the biggest debt crisis of our lifetime - even after the recent fall in unemployment.

"But over many years this country built up massive debts, which we are having to pay off."

He added that the recession in much of the rest of Europe was hampering the recovery, but pledged not to abandon his "credible plan" to cut the budget deficit.

The ONS's first estimate is compiled before more than half of the data has been gathered and some economists are hopeful that today's figure will be revised higher in coming months.

The services sector, which accounts for some three-quarters of the economy, saw growth of 0.1% in the quarter, after a decline of 0.1% in the final quarter of 2011.

Retail sales were boosted last month by panic-buying of petrol amid fears of a tanker drivers' strike and a heatwave encouraged people to buy summer clothes.

But the industrial production sector declined 0.4%, with manufacturing down 0.1% after a 0.7% decline in the previous quarter. The continued fall in manufacturing will come as a blow to the Government, which is hoping the sector will lead the recovery.

The construction sector saw a 3% decline in the quarter, its biggest contraction since the first quarter of 2009, although the findings contradict recent industry surveys for both the manufacturing and construction sectors.

Bank of England policymakers have also said recent results from the construction sector were "perplexing".

Chris Williamson, chief economist at Markit, said: "The underlying strength of the economy is probably much more robust than these data suggest.

"The danger is that these gloomy data deliver a fatal blow to the fragile revival of consumer and business confidence seen so far this year, harming the recovery and even sending the country back into a real recession."

Shadow Chancellor Ed Balls said: "David Cameron and George Osborne complacently boasted their austerity plan had taken our economy out of the danger zone, but their failed policies have plunged us back into recession.

"We consistently warned that their austerity plan was self-defeating and that cutting spending and raising taxes too far and too fast would badly backfire.

"David Cameron and George Osborne arrogantly and complacently dismissed people who warned of the risk of a double-dip recession and the country is now paying a very heavy price. Their economic credibility is now in tatters."

Mr Balls said the UK economy had now shrunk by 0.2% in the 18 months since Mr Osborne's spending review, which laid out an austerity package of spending cuts.

And he added: "The Chancellor needs to explain why America, which has taken a much more balanced approach with a jobs plan to boost growth, has more than recovered all the output it lost in the global recession while our economy is shrinking again.

"The price of this recession is billions more borrowing to pay for economic failure. The Government's pledge to balance the books by 2015 is now in tatters and the next Labour government will have to clear up George Osborne's economic mess.

"The longer this out of touch and incompetent Government sticks with these failed policies, the more damage will be done."

Deputy Prime Minister Nick Clegg admitted the GDP figures were "disappointing", but insisted the basic "building blocks" of the Government's strategy were right.

"These are not overnight projects, we have undergone a profound trauma in the economy," Mr Clegg told the Institute of Directors (IoD) conference in London.

He said: "Fixing the damage takes time and commitment. Our task has been nothing less than rescue, repair and reform. There are no shortcuts."

Graeme Leach, chief economist at the Institute of Directors, said: "Although the fall in GDP in the first quarter was relatively small, the impact on the economy will be much greater because of the knock to consumer and business confidence.

"Confidence has already taken a battering from the euro crisis and today's news means companies are less likely to boost investment and recruitment this year.

"But even though we are back in recession, the IoD does not believe we should slow down on deficit reduction."

David Kern, chief economist at the British Chambers of Commerce (BCC), said: "The figure is disappointing, and paints an unduly pessimistic picture of the state of the economy.

"Business surveys, including the BCC's Quarterly Economic Survey, have shown a more positive picture, and we believe these give a more accurate indication of the underlying trends in the economy. We think it is likely that the preliminary estimate will be revised upwards when more information is available.

"But it is clear that economic growth in the UK remains much too low. We need to see a reallocation of priorities within Plan A that will bolster business growth. That means reducing regulation, encouraging exports and improving infrastructure."

Brian Berry, chief executive of the Federation of Master Builders, said: "The Government will find it very difficult to get sustained growth in the economy while the construction industry remains depressed.

"Construction is essential to the wellbeing of the wider economy because of the variety and quantity of jobs its creates, from apprentice bricklayers to world-leading architects. Every £1 spent on construction generates £2.84 in the wider economy, which makes it the best investment the Government can make to get Britain back on its feet."

Chief executive of the Child Poverty Action Group Alison Garnham said: "The economy may now be back in a technical recession but the truth is that, for many families with children, the recession had never gone away as they have endured a miserable few years coping with rising living costs, job losses, wage freezes and cuts in social protection.

"In a recession, unemployment rises, so rather than spuriously blaming rising welfare bills on dependency, ministers have to do more to create jobs, help parents move into work by providing better childcare, and reinstate the tax credits taken away this month from many low-paid couples."

PA

PROMOTED VIDEO
Voices
voicesBryony Beynon: This is something every woman can relate to
Arts and Entertainment
film

News
Mock the tweet: Ukip leader Nigel Farage and comedian Frankie Boyle
peopleIt was a polite exchange of words, as you can imagine
Arts and Entertainment
Steven, Ella Jade and Sarah in the boardroom
tv
Life and Style
fashion
Life and Style
Britons buy more than 30 million handsets each year, keeping them for an average of 18 months
tech
Arts and Entertainment
Benedict Cumberbatch is reported to be in final negotiations to play Doctor Strange for Marvel although the casting has not yet been confirmed
film
News
people
Arts and Entertainment
Alloysious Massaquoi, 'G' Hastings and Kayus Bankole of Young Fathers are the surprise winners of this year's Mercury Music Prize
musicThe surprise winners of the Mercury Prize – and a very brief acceptance speech
Arts and Entertainment
TV Presenters Ant McPartlin and Dec Donnelly. Winners of the 'Entertainment Programme' award for 'Ant and Dec's Saturday Night Takeaway'
musicAnt and Dec confirmed as hosts of next year's Brit Awards
Arts and Entertainment
Orson Welles made Citizen Kane at 25, and battled with Hollywood film studios thereafter
film
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
fashion

World Beard and Moustache Championships held last week

News
video
Arts and Entertainment
Copycat culture: the Chateau Zhang Laffitte in China, top, and the building which inspired it, in Paris, bottom
architectureReplicas of Western landmarks are springing up in unlikely places
Sport
Rolando Aarons watches as his effort finds the corner of the Manchester City goal to give Newcastle the lead
footballManchester City 0 Newcastle 2: Holders crash out on home turf
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Finance Assistant - Part time - 9 month FTC

£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

Marketing Manager

£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

Market Risk Manager - Investment Banking - Mandarin Speaker

£45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Day In a Page

Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes
Independent writers remember their Saturday jobs:

Independent writers remember their Saturday jobs

"I have never regarded anything I have done in "the media" as a proper job"
Lyricist Richard Thomas shares his 11-step recipe for creating a hit West End musical

11-step recipe for creating a West End hit

Richard Thomas, the lyricist behind the Jerry Springer and Anna Nicole Smith operas, explains how Bob Dylan, 'Breaking Bad' and even Noam Chomsky inspired his songbook for the new musical 'Made in Dagenham'
Tonke Dragt's The Letter for the King has finally been translated into English ... 50 years on

Buried treasure: The Letter for the King

The coming-of-age tale about a boy and his mission to save a mythical kingdom has sold a million copies since it was written by an eccentric Dutchwoman in 1962. Yet until last year, no one had read it in English
Can instilling a sense of entrepreneurship in pupils have a positive effect on their learning?

The school that means business

Richard Garner heads to Lancashire, where developing the 'dragons' of the future is also helping one community academy to achieve its educational goals
10 best tablets

The world in your pocket: 10 best tablets

They’re thin, they’re light, you can use them for work on the move or keeping entertained
Lutz Pfannenstiel: The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents

Lutz Pfannenstiel interview

The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents
Pete Jenson: Popular Jürgen Klopp can reignite Borussia Dortmund’s season with visit to Bayern Munich

Pete Jenson's a Different League

Popular Klopp can reignite Dortmund’s season with visit to Bayern
John Cantlie video proves that Isis expects victory in Kobani

Cantlie video proves that Isis expects victory in Kobani

The use of the British hostage demonstrates once again the militants' skill and originality in conducting a propaganda war, says Patrick Cockburn
The killer instinct: The man who helps students spot potential murderers

The killer instinct

Phil Chalmers travels the US warning students how to spot possible future murderers, but can his contentious methods really stop the bloodshed?
Clothing the gap: A new exhibition celebrates women who stood apart from the fashion herd

Clothing the gap

A new exhibition celebrates women who stood apart from the fashion herd
Fall of the Berlin Wall: Goodbye to all that - the lost world beyond the Iron Curtain

The Fall of the Berlin Wall

Goodbye to all that - the lost world beyond the Iron Curtain