It may be too late to save the UK economy from recession

Today has seen a flood of bad economic news. The Autumn Statement may be too little, too late.

I am really hoping that one of these mornings I am going to wake up to some good economic news. But today was definitely not that day. The continuing flow of bad news on top of bad news is something we are all now becoming accustomed to.

I can only imagine how Vince and George feel every day when they open the economics and business pages of the newspapers. I did think it was time to try to be optimistic but I could find zero good news on the economics front; sorry. Neither Papendreou nor Berlusconi's resignations appear to have calmed the market's nerves.

Today started with an email from REC/KPMG's report on Jobs showing that the number of permanent placements had gone into negative territory. Recall that the latest labour market estimates from the ONS showed that employment had fallen over the last quarter by 178,000. So this is very bad news as it suggests that the labour market is headed downwards fast. Unemployment is set to rise again and there is every likelihood that youth unemployment will hit the million mark very soon.

No wonder there are thousands of youngsters on the streets of London, to this point protesting peacefully, about the government's lack of a credible higher education policy or any strategy to deal with rising youth unemployment.

But the bad news continued to flood in all morning. First there was the ONS publication of August's trade in goods deficit revised from £7.8bn to £8.6bn, but the deficit then widened further in September to £9.8bn - the biggest on record.

Second the CBI cut its growth forecast for 2011 to 0.9 per cent from 1.3, and for 2012 to 1.2 from 2.2 per cent, which is slightly more optimistic than NIESR's estimate yesterday of 0.8 and 0.9 per cent - recall that the OBR expects 2.6 per cent in 2011 and 2.8 per cent in 2012.

Third, the ICAEW/Grant Thornton Business Confidence Monitor showed business confidence has collapsed - companies are as gloomy about the outlook now as they were in the depths of the recession. The slump in sentiment pointed to a 0.2 per cent drop in GDP in Q42011.

And finally, we mustn't forget Italy - their 10 year bond yields were up 66bp at 7.37 per cent at noon today which is in bailout territory. Spanish yields were also up at 5.7 per cent. Greek yields are already over 25 per cent while 10 year Portuguese yields are over 11 per cent. This suggests the eurozone is heading into recession which hurts the UK economy which also now seems headed that way. Q42011 and Q12012 look likely to have negative GDP growth, which is consistent with a technical definition of a recession.

So the headwinds continue to gather. The Autumn Statement at the end of the month looks like it is going to be too little too late to prevent the UK economy going back into recession. I did warn them.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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Who will win in Stoke-on-Trent?

Labour are the favourites, but they could fall victim to a shock in the Midlands constituency.  

The resignation of Tristram Hunt as MP for Stoke-on-Central has triggered a by-election in the safe Labour seat of Stoke on Trent Central. That had Westminster speculating about the possibility of a victory for Ukip, which only intensified once Paul Nuttall, the party’s leader, was installed as the candidate.

If Nuttall’s message that the Labour Party has lost touch with its small-town and post-industrial heartlands is going to pay dividends at the ballot box, there can hardly be a better set of circumstances than this: the sitting MP has quit to take up a well-paid job in London, and although  the overwhelming majority of Labour MPs voted to block Brexit, the well-advertised divisions in that party over the vote should help Ukip.

But Labour started with a solid lead – it is always more useful to talk about percentages, not raw vote totals – of 16 points in 2015, with the two parties of the right effectively tied in second and third place. Just 33 votes separated Ukip in second from the third-placed Conservatives.

There was a possible – but narrow – path to victory for Ukip that involved swallowing up the Conservative vote, while Labour shed votes in three directions: to the Liberal Democrats, to Ukip, and to abstention.

But as I wrote at the start of the contest, Ukip were, in my view, overwritten in their chances of winning the seat. We talk a lot about Labour’s problem appealing to “aspirational” voters in Westminster, but less covered, and equally important, is Ukip’s aspiration problem.

For some people, a vote for Ukip is effectively a declaration that you live in a dump. You can have an interesting debate about whether it was particularly sympathetic of Ken Clarke to brand that party’s voters as “elderly male people who have had disappointing lives”, but that view is not just confined to pro-European Conservatives. A great number of people, in Stoke and elsewhere, who are sympathetic to Ukip’s positions on immigration, international development and the European Union also think that voting Ukip is for losers.

That always made making inroads into the Conservative vote harder than it looks. At the risk of looking very, very foolish in six days time, I found it difficult to imagine why Tory voters in Hanley would take the risk of voting Ukip. As I wrote when Nuttall announced his candidacy, the Conservatives were, in my view, a bigger threat to Labour than Ukip.

Under Theresa May, almost every move the party has made has been designed around making inroads into the Ukip vote and that part of the Labour vote that is sympathetic to Ukip. If the polls are to be believed, she’s succeeding nationally, though even on current polling, the Conservatives wouldn’t have enough to take Stoke on Trent Central.

Now Theresa May has made a visit to the constituency. Well, seeing as the government has a comfortable majority in the House of Commons, it’s not as if the Prime Minister needs to find time to visit the seat, particularly when there is another, easier battle down the road in the shape of the West Midlands mayoral election.

But one thing is certain: the Conservatives wouldn’t be sending May down if they thought that they were going to do worse than they did in 2015.

Parties can be wrong of course. The Conservatives knew that they had found a vulnerable spot in the last election as far as a Labour deal with the SNP was concerned. They thought that vulnerable spot was worth 15 to 20 seats. They gained 27 from the Liberal Democrats and a further eight from Labour.  Labour knew they would underperform public expectations and thought they’d end up with around 260 to 280 seats. They ended up with 232.

Nevertheless, Theresa May wouldn’t be coming down to Stoke if CCHQ thought that four days later, her party was going to finish fourth. And if the Conservatives don’t collapse, anyone betting on Ukip is liable to lose their shirt. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.