Triple-dip recession looms as economy shrinks by 0.3%

If economy contracts in the first three months of this year, the UK will be back in recession for the third time in five years

Fears that Britain will slip into a “triple-dip recession” grew today when official figures showed that the economy shrank by 0.3 per cent in the last three months of 2012.

The worse-than-expected figures from the Office for National Statistics (ONS) will increase the pressure on the Chancellor George Osborne to announce an economic Plan B in his March Budget to boost growth and slow the pace of his spending cuts.

Today’s figures were disappointing because they showed that  manufacturing declined by 1.5 per cent between last October and December compared to the previous three months, while the services sector was flat.  Construction rose by 0.3 per cent in the final quarter.

If the economy also contracts in the first three months of this year, the UK will be back in recession for the third time in five years. The bad weather could depress the first quarter figures, adding to the risk of a “triple-dip recession.”

Joe Grice, chief economist at the ONS, said the underlying trend in the economy was “flat”, with no growth in 2012 as a whole and “a bumpy economy on a rather sluggish trend.” He said the decline in the final quarter of last year was partly due to the comparison with stronger growth in the previous three months, which was boosted by sales of Olympic Games tickets. That effect reduced the Gross Domestic Product (GDP) figure for the final quarter by 0.2 per cent.

Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said: “There are no positive takeaways from today’s first estimate of GDP in the final months of last year. Even assuming some unwinding of activity from the Olympics boost in the previous quarter, this still leaves no real signs of underlying growth in the economy. The news from industry was particularly weak.”

Mr Osborne will insist that Britain remains “on the right track” and will reject calls for a Plan B.  A Treasury spokesman said: “ The official forecast was that the UK economy would contract in the last quarter of 2012 so this figure is not unexpected. It confirms what we already knew - that Britain, like many European countries, still faces a very difficult economic situation.It underlines what the Chancellor said at the autumn statement and the governor of the Bank of England said this week: while the economy is healing, it is a difficult road."

Political pressure on Mr Osborne for a change of course is likely to be joined by the Liberal Democrats. Although they are not calling for a Plan B, they are pressing privately for more major building projects to revive the flatlining economy.  In an interview with Parliament’s The House magazine published today, Nick Clegg admitted the Coalition made a mistake by cutting such capital spending when it was formed in 2010.  He described his remarks as “self-critical” but they lifted the veil over differences between the two Coalition parties.

The figures could provoke further pressure on the Chancellor from senior figures at the International Monetary Fund for him to ease the pace of his cuts.

Ed Balls, the shadow Chancellor, said: “These deeply disappointing figures expose just how dangerously complacent the Prime Minister was when he said last autumn that the ‘good news will keep coming’.  Today's news confirms what business leaders, retailers and families have known for many months - that depressed confidence and a chronic shortage of demand mean our economy continues to flatline. This Government’s failing plan has now seen our economy stagnate for over two years and borrowing is now rising as a result.”

Mr Balls added: “It is grossly irresponsible and out of touch of George Osborne to once again try to shrug off bad news and refuse to heed the advice now coming to him from right, left and centre.”

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory