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.

By David Blanchflower Published 09 November 2011 16:24

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.

Tags: British economy

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29 comments

Thu, 2011-11-10 14:53 — WoW WoW WoW (not verified)

Dave, you are 3 years too late in comings. Its all Gordan I sold the Gold Brown's fault. I know too tough for the leftists to accept, but truth.

Thu, 2011-11-10 14:59 — WoW WoW WoW (not verified)

@Nodbod, if you bail out banks by giving them hundreds of Billions and when you increase government spending again by billions...they are all long term.

Now with the effect, that whenever you would want to cut NHS or public sector spending, you would have unions dancing on our heads. Also it is doubly difficult to convince people to live within their means when people observe that the sold the gold Brown mortgaged British Future to the Bankers.

Thu, 2011-11-10 15:02 — WoW WoW WoW (not verified)

@Nobod

When you buy an expensive house, say a million pound worth of house when your income is £20K every year and the value of the house collapses, you are going to feel the effect for all your life and maybe generations.

So dont be surprised we are done in by mindless spending by Gordan Brown, something which Dave is again advocating.

Thu, 2011-11-10 15:04 — Indu Pendent (not verified)

@danny

What would you do about the Ities (and French because their banks are about to start failing)?

- Italy exits Euro?
- debt restructuring e.g. 50% write off?
- severve austrity measures?
- ECB bailout/ QE (defer the problem)?
- IMF (should the UK contribute more and what should we ask in return)?
- Chinese trade war if no hand out is forthcoming (no wonder that have been building air craft carriers and submarines)?

Could always seek escapism through the crudd and join Mr Devine on the beach with his fishing boat project. Need to take a few cans of wife beater for the barbie.

Fri, 2011-11-11 10:04 — Good Awake (not verified)

@Awake, I cant believe you are a leftie just as some would not believe I am on the right because I am so pro-break the bank person.

I guess what binds us together is fear of fake money.

Both the left and the Bankers and their friends in left and right love fake money.

Governments love it because they have traditionally printed it, Bankers love it because they have found ways of doing it in Capitalist economy (by the way, it is fraud Capital).

Fri, 2011-11-11 10:10 — Good Awake (not verified)

Are we going to see the World Communist Government once all this fake money led growth and all that collapses? I am so fuck*in capitalist; but I guess if the government and big businesses are so fuck*in in cahoots and corrupt; who would believe whom then?

And what is money without faith?

Power to people, I would say!

Wed, 2011-11-09 17:01 — Des Demona (not verified)

Don't speak too soon. When this 80mph speed limit comes in just watch the economy take off. This and other brilliant ideas like the Big Society ( is that still going?) will save the day!

Thu, 2011-11-10 16:25 — Michael B (not verified)

There is a solution, and they've ignored it for a year.
It could be having cushioning effect on the economy right now, but they've ignored it for a year.
It was drawn up by a finance expert who specialises developing new business models, but they've ignored it for a year.
It doesn't cost the Treasury a penny, but they've ignored it for a year.
You've never heard about it, because they've ignored it for a year.
Politicians and the press. They've ignored it for a year.

Wed, 2011-11-09 17:50 — Nodbod (not verified)

It's all Gordon Brown's fault. He sold the gold off. I know this is true because it was told to me last Friday. I tried to point out that the Tories had been incharge for quite some time now and Gordon was only PM for 18 months and that Germany, France, Greece and the USA were all in the same boat; that it was an international crisis. My conversationalist said that he (Gordon Brown) had been chancellor beforehand and that the Tories had been left with an irretrievable situation. Funny how they never said that when going for election.

Wed, 2011-11-09 18:04 — Suzanne (not verified)

I nearly pissed myself laughing when Osborne was lecturing the Eurozone on policy. Really George? You think your in a position to tell other countries how to run their economies? He's so far out his depth now it's worrying and the only thing keeping him there is public school connections and a strong sense of entitlement.

Wed, 2011-11-09 18:17 — Matelt (not verified)

Funny how everyone talk about 'calming the market' as it was some sort of monster. What have we became?

Wed, 2011-11-09 18:24 — Awake!

We have got low interest rates though, which bearing in mind we have the biggest debt in europe is well handy... so it's not all bad. And pehaps u missed the growh last quarter, there was no piece from you about it at any rate.
You warned there would be a euro collapse last year???! missed that...
The real giggle is some people still think a 'bazooka' fund is going to save the day... hehe politicians, they would be so funny were it not for the carnage they bought about. They have done NOTHING since 2008 when we had the major warning, no one wanted to change their lifestyle, so now we're entering thye endgame with no contingency plans... U N B E L I E V A B L E, but predictable due to BS party political point scoring whilst nothing gets fixed.
Hang on tight folks, gonna be rocky next year....
P.S. My italian mate needs to borrow 300 billion euros next year and he's really paying up , any takers?? No? hey, according to previous economists here at NS site low rates curently is because of slowing economies, Italian debt was yielding half of what it is now only 1 year ago, so SURELY there must be takers at these levels, right professor Krugman, mayo612, Daniel, Blanchflower... yes all of u guys who argued that UK wasnt a haven right now and I argued back saying u were politically motivated... why is italian debt yielding so much...and just one last point
WHY THE FUCK SHOULD ANYONE LISTEN TO ANY OF YOU INCOMPETENT ECONOMIC ILLITERATES EVER AGAIN!!! This crash was the easiest to see EVER, and only for one of u (mr Blanchflower it seems) has the penny finnaly, finally dropped.
But hey ho, why should I be frustrated- it's just ANOTHER wasted generation of young who get screwed by their politically motivated greedy pig elders, and I'm alright jack thx very much...

Wed, 2011-11-09 18:25 — Sean O'Hare (not verified)

@Nodbod

You and your "conversationalist" are correct. Some credit is grudgingly due to Brown for keeping us from joining the euro, no matter what his (anti Blair!) motives were at the time. However as well as selling off our gold reserves at rock bottom price, he also screwed my pension and that of many people who had paid into occupational schemes throughout their working lives. I despise him for that and always will.

Returning to the current financial crisis, it is not true to say that we and the USA are in the same boat at Euroland. We and the USA have both debased our currencies by quantative easing, i.e. have released the head of steam that was building up. I am pissed off at this because it further erodes the prospect of my pension keeping me from penury until my days are through. QE came about because Brown and Darling abrogated fiscal responsibility to the Bank of England and the FSA, neither of which could manage a p*ss up in a brewery. The coalition is also to blame for not reversing that immediately.

Euroland on the other hand has not yet resorted to QE in any meaningful way and the euro is still riding high in the currency markets. The head of steam has now reached explosive levels. As the member states exit the euro one by one the euro will either collapse or become de-facto the new Deutchmark. In either case the result will be chaos caused primarily by a fanatical desire for a European superstate followed by one-world government. A pox on all their houses!

Thu, 2011-11-10 17:09 — matthew fox (not verified)

Inbrew. Your computer seems not to be functioning, you have still failed to provide evidence, that Lagarde and credit rating agencies criticised Public Sector Pensions.

Is it coming back to you?

Wed, 2011-11-09 19:34 — matthew fox (not verified)

Awake - your caps lock seems to have broken again.

Thu, 2011-11-10 19:51 — Indu Pendent (not verified)

@matt

Foxy, what? Have you been running through gardens eat fermenting apples again as your arguments keep falling over? I've told you before and will tell you again to go and read Lagardes speach where she says pensions need to be tackled which indirectly criticises those who do not do so.

The credit rating agencies rate us on our ability to control public expenditure (look at Italy) and so any criticism that Legarge makes on this will be shared by the rating agencies.

So you dont agree with my point of view - fine. But that not what you are saying.

We do agree on some things: like Labour failing to get on intersonally with Ford's US management team because of political bigotry and not supporting them with less money than was wasted under Labour with MPs expenses. It lost the UK the production of the Fiesta with 3,000 direct jobs going and 10,000 jobs in the supply chain. Enough to have a significant impact on the economy now.

Wed, 2011-11-09 21:53 — Indu Pendent (not verified)

@danny

"I did warn them." Oh Danny, thats is such a silly think to say.

Only by selling better, cheaper, more efficiently will the UK recover.

I do not have the stats but suspect the UK is moving in the right direction towards improved competitiveness faster than other European economies.

The huge enormous threat to the world economy is if Chinese growth stalls - this will kill the high level of labor inflation they are experiencing and the UK will have no chance of approaching the competitive parity value for our labor. It will cause a 50 year recession as the Chinese effectively have a bottomless pit of non-idustrialised labor to absorb into the mainstream economy.

Now I have warned them.

Wed, 2011-11-09 22:03 — Indu Pendent (not verified)

@matt

Foxy, did you follow the firework code or may be you hid in your (fox) hole? You must have had a magnificent bonfire (all your one legged straw men).

I think your computer must be broken becuase you never answered the question whether the coalition should increase or decrease borrowing. The choice is between Milibandwagon and Balls up so understand your mind has not yet been made up for you.

Thu, 2011-11-10 21:13 — matthew fox (not verified)

Come on Inbrew, you can't even remember the garbage you write. Again I will ask for evidence, from the Lagarde and the Credit Rating Agencies, explicitly criticising public sector pensions.

Time to put or shut up Inbrew, the clock is ticking.

Wed, 2011-11-09 23:31 — Awake!

anyone want to bet how long before the germans allow ecb to print??
The final act, ladies and gentlemen- our leaders, political and economic, WILL have their way- Our children will pay for their buffonery whilst the pantomime of left and right caries on. our children will pay for the mountains of debt accumulated, because somehow in the last 30 years, our illustruious economists convinced us all that debt was our saviour. Really...

Wed, 2011-11-09 23:36 — Awake!

and Fox, u'll be there on the sidelines, cheering the left, your children enslaved, butb that will be fine by you, no doubt about it...

Thu, 2011-11-10 22:12 — Awake!

matt
u are so stupid it's painful. For you everything has to be explicit because you can't do any working out for yourself.
What do you think the Greeks , the Italians and the French etc mean when they say they are restructuring? You're such a fucking idiot going on about Lagarde, each time driving a nail in the coffin of you're own argument. Truly ure only purpose must be to wind people up cos u are so incapable of working thru the most basic argument, but ure particularly annoying because u pretend to be some sort of leftie by always attacking cameron and osborne yet actualy u undermine ure own cause with ure own statements. Ure obviously some right wing nutter because no one can be as thick as u unless ure a medical zombie. Miiliband was growing on me then he blursts out today that Cameron is standing on the sidelines in Europe- this dumb tactic u guys use, it gets exposed so quickly and people are wise to it- the cold is coming- politics of shouting loudest is gioing to really piss people off.
Look at the idiot Cable, saying today Italy ain't a problem... u'll see high end manufacturers in UK start to do well morons (Cable, fox balls etc) selling into the world, with brits doing jobs they are proud of. Why anyone has to listen to these clowns who can't predict their own breakfast let alone run an econmy its shambolic.
Look it's simple
1.5 trillion, , with 180-300 billion due to be raised 2012, and the auctions start in Jan- Now that aint gonna happen ok?? peole are NOT going to buy italian debt, except the ECB, BUT
BUT BUT the ECB cant print, germans won't have that, and the ECB dosent enough money. So shrink EU? well germans saying they don't want that cos the losses right now too big, Italy exiting is out the question because EUROPEAN BANKS can't afford that hit... it's tortuous sort of, but there are only 2 scenarios currently.
1. Unstructured, uncontrolled blow up, trade wars, global depression massive scale global unemployment, truly horrid. Currently this is where we are being led by a high stakes game of political brinkmanship... and guess which country is at the heart of this folks... Germany... yes, of course there peole don't want to have to foot the bill for profligate peripheral efnics, them so hardworking- but huns did sell them a lot of gear didn't they? and there banks lent them the money to do so right? and the Germans and french gave those countries the credit ratings via euro membership which allowed the countries to borrow from those french and german banks, right.... hey, not a conspiracy theory, just the facts, draw your own conclusion. Personally, the most one can reasonably draw from this (i say reasonably cos fox will deduce i'm maggie thatcher based on this he's such a tool) is that the bullies in europe cocked up , their banks cocked up, and now they want to use this to crucify these countries. laterz democracy, hello big cororate...
OR,
2. ECB prints, fiscal integration acceleration (note new Greek PM is ex ECB man- he will be rewarded for selling out on his countrymen when he implements 20 years of hell on his people cos the western banks mislent, but democracy started in Greece and it looks like it will end there.
It's shocking- these fucking econmist/political clowns have brought about a situation whreby the best solution is to print money.
GO FIGURE TAXPAYER, and when u kiss your child goodnight tonite, think about the legacy u bequeath them... and I still have to listen to my mates calling me a eurosceptic when all i've ever maintained is that we should celebrate our diversity whilst simulatenously recognising ourselves in other- it's not fucking complicated if u try meditation, instaed we go for party politics.
Indu
the first chinese carriers can't effectively get aircraft landed on them- there secind and 3rd iterations will be a lot better i'm sure...

Thu, 2011-11-10 22:27 — matthew fox (not verified)

Awake, please ring the Fisher Price helpline, and trying to get your computer, caps lock fixed.

Thu, 2011-11-10 22:33 — ang (not verified)

Now then, now then!

Thu, 2011-11-10 01:01 — Mr. Divine (not verified)

You know I'm starting to think you might be right Danny. You obviously have studied the data closely and I suspect you've come to the same conclusion. You've to see the big picture. Clearly it is the Asia Pacific Region that is on the increase big time. You've got massive population who are hungry for goods and services. Look at China's growth!

If I had money to invest that's where I would be putting it. But you've probably worked that out too. I'm fortunate being in Australia ... resource rich. Got to go for growth shares like BHP and Rio Tinto. Then you move up into China .. well its basics isn't it ...steel, steel, steel. Think about all those new cars. They might be small but there will be loads of them. Then you'll have all those very rich Chinese people buying property in ..err.. Hong Kong for sure. So any property related shares are a must.

Danny, you've probably worked it out ages ago. Here you can buy overseas shares through banks. Australia's banking system is in great shape the dividends are huge... so it's a safe way to invest for growth.

Thu, 2011-11-10 23:11 — matthew fox (not verified)

Is Ang channelling Jimmy Savile?

Thu, 2011-11-10 23:24 — Awake!

great come back Foxy.. an allusion to toys out the pram- VERY subtle and clever.
Now, did u understand re Lagarde ?? I did spell it out for you but substitution arguments require the ability to hold an idea for about 10 to 15 seconds and frankly i'm impressed that u even manage to draw breath cos u need an IQ of at least 50 for that.
So, did u get it? Everytime those people on telly talk about structural reform, they are talking about pensions (well it's one of the things). Currently , idiots like yourself are annoying the many who contribute o this pot, such that they are driving empathy away... and mixed with the cold about to set in, well u see... (actually u probably don'y)

Thu, 2011-11-10 08:24 — Awake!

Mr Divine
The east will not escape when europe goes down, it has not developed a sufficient critical mass to go it alone. There are problems in china sir, yes they have piles of cash but there liabilities are unknown at local govt level. They will experience a classic boom and bust as a massive bank deleveraging exercise begins in the west. It's almost silly of politicians to talk of individual countries.
ALL THIS COULD HAVE BEEN AVOIDED WITH MORE HONESTY FROM THE POLITICAL CLASS

Thu, 2011-11-10 11:05 — Attrition47

How typical of the NS to overlook the depression which began in 1974 and which has been institutionalised, so as to loot us poor for the benefit of NS readers.