The nightmare of a double-dip recession today became reality as the UK economy recorded its second consecutive quarter of contraction.
The news that the economy contracted by 0.2% in the first quarter of 2012 came as a shock to most economists, many of whom had predicted a very slight uptick.
A lack of confidence in the construction industry has been a major contributor to the slump. The sector contracted 3% in the first three months of the year. That is the biggest quarterly fall for three years.
Joey Gardiner, assistant editor of Building magazine, told Professional Manager that cuts in government investment were to blame for the slump in the industry. “Confidence has been hit severely by the sharp fall in public spending,” he said. “The cuts took longer to come through than expected, but now they are really beginning to bite. Meanwhile, slight increases in private sector investment – particularly in London – haven’t yet been anything like big enough to cover the shortfall.”
Vince McLoughlin, partner at business, tax and charity advisers Russell New, said the Government lacks any coherent plan to get the econony moving again. “It was almost inevitable that the austerity measures in place would have the effect of pushing the UK back into recession,” he said. “Many have been warning for the last year that the measures taken would have the inevitable consequence of a technical recession, not just a feeling of one. The Government is simply failing to show any boldness to drive the economy back into action.
“The only thing preventing the figures being worse is the contribution of the service sector but how much longer can this continue to provide any stimulus to growth?”