The UK is back in recession

Cameron's week gets even worse.

It just gets worse for David Cameron. The Office for National Statistics has confirmed that the UK is officially back in recession. Output in the first quarter of this year fell by 0.2 per cent, following a drop of 0.3 per cent in the previous quarter. In other words, the technical definition of a double-dip recession (two consecutive quarters of falling output) has now been met.

Following the politically catastrophic Budget, this could not have come at a worse time for government. At the very moment that voters are losing faith in George Osborne's ability to manage the economy, the data confirms that they are right to do so. Ed Balls, who warned of the risk of a double-dip recession before any other senior politician, has been entirely vindicated.

And the economics are little better. The figures could yet be revised up (or down) but one thing is clear: there is no recovery to speak of. The worse-than-expected figures (the Office for Budget Responsibility forecast growth of 0.3 per cent) mean that Osborne will be forced to borrow even more, further damaging his reputation and imperiling the UK's cherished AAA rating. The Chancellor will, inevitably, pin much of the blame on the eurozone crisis but the inconvenient truth is that growth evaporated long before the current troubles.

As for Cameron, with PMQs and Rupert Murdoch's appearance at the Leveson inquiry still to come, the worst day of his premiership has barely begun.

British Chancellor George Osborne meets residents during the official opening of the Google Campus on March 29, 2012 Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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The Brexiteers have lost battles but they are still set to win the war

The prospect of the UK avoiding Brexit, or even a “hard” version, remains doubtful. 

Before the general election, the Brexiteers would boast that everything had gone their way. Parliament had voted to trigger Article 50 by a majority of 372. The Treasury-forecast recession hadn't occurred. And polls showed the public backing Brexit by a comfortable margin

But since the Conservatives' electoral humbling, the Leavers have been forced to retreat on multiple fronts. After promising in May that the dispute over the timetable for the Brexit talks would be "the fight of the summer", David Davis capitulated on the first day.

The UK will be forced to settle matters such as EU citizens' rights, the Irish border and the divorce bill before discussions begin on a future relationship. Having previously insisted that a new trade deal could agreed by 29 March 2019 (Britain's scheduled departure date), the Brexiteers have now conceded that this is, in Liam Fox's words, "optimistic" (translation: deluded). 

That means the transitional arrangement the Leavers once resisted is now regarded as inevitable. After the eradication of the Conservatives' majority, the insistence that "no deal is better than a bad deal" is no longer credible. No deal would mean the immediate return of a hard Northern Irish border (to the consternation of the Tories' partners the DUP) and, in a hung parliament, there are no longer the votes required to pursue a radical deregulatory, free market agenda (for the purpose of undercutting the EU). As importantly for the Conservatives, an apocalyptic exit could pave the way for a Jeremy Corbyn premiership (a figure they previously regarded as irretrievably doomed). 

Philip Hammond, emboldened by the humiliation of the Prime Minister who planned to sack him, has today outlined an alternative. After formally departing the EU in 2019, Britain will continue to abide by the rules of the single market and the customs union: the acceptance of free movement, European legal supremacy, continued budget contributions and a prohibition on independent trade deals. Faced with the obstacles described above, even hard Brexiteers such as Liam Fox and Michael Gove have recognised that the game is up.

But though they have lost battles, the Leavers are still set to win the war. There is no parliamentary majority for a second referendum (with the pro-Remain Liberal Democrats still enfeebled), Hammond has conceded that any transitional arrangement would end by June 2022 (the scheduled date of the next election) and most MPs are prepared to accept single market withdrawal. The prospect of Britain avoiding Brexit, or even a "hard" version, remains doubtful. 

George Eaton is political editor of the New Statesman.