UK is 'limping' out of deep recession, say economists

"Disappointing" official figures on economic growth mean that the UK is "limping rather than sprinting" out of recession, say economists.

Against expectations that the economy would expand by 0.4 per cent in the first three months of this year, the Office for National Statistics (ONS) reported yesterday that the economy had grown by just 0.2 per cent.

It is a slackening on the 0.4 per cent seen in the last quarter of 2009. Few observers expect the economy to recover to pre-crisis levels before 2012.

The depressed state of the construction, hotel and restaurant and retail sectors pushed the figures down. Telecoms, business services and finance sectors also recorded steady growth.

The poor weather during January may have hit tourism, the leisure industry and the building trade harder than previously thought, while economists also pointed to the ONS's patchy recent record for accuracy. Its initial reading for fourth-quarter GDP in 2009 was upgraded from 0.1 per cent to 0.4 per cent in successive revisions.

Even so, and coming after this week's higher-than-feared unemployment and inflation numbers, there is some anxiety about what the figures may presage. John Hawksworth, the head of macroeconomics at PricewaterhouseCoopers, said: "GDP growth of only 0.2 indicates that the UK economy was limping rather than sprinting out of recession in the early part of this year, held back by the snow and the VAT rise in January. Although the UK economy is technically out of the recession, the recovery will still feel fragile to many businesses."

Industry reacted cautiously to the news. Recent surveys of business confidence and export orders suggest that the benefits of sterling's 25 per cent depreciation since 2007 are starting to feed through, though slowly.

The EEF's chief economist Lee Hopley said: "Despite a rocky start to the year, the economy now seems to have turned a corner. Manufacturing continues to play a more substantial role in the recovery with output up more than 1 per cent on a year ago.

"However, it will be decisions on tax and spending that come after the election that will determine whether more balanced growth can be sustained as the recovery continues," he added.