The UK could already be back in recession, say forecasters

The Item Club and the CEBR say Britain is in a double-dip recession. Where is the government's plan

Barely a week goes past without more bleak economic news. And now, according to two top forecasters, it appears that the UK could already be back in recession.

Ernst and Young's Item Club and the Centre for Economics and Business Research (CEBR) both believe that GDP shrank in the final quarter of 2011 and will fall again in the current three month period. A recession is defined as two consecutive quarters of contracting output.

This may come as no surprise (the OECD predicted similar results in November last year), but the Item Club's predictions are particularly worrying for the coalition. It is the only non-governmental forecasting group to use the same economic model for its forecasts as the Treasury and the Office for Budget Responsibility (OBR).

The Item Club's report predicts that the economy will grow just 0.2 per cent this year, and will not return to normal levels of growth until 2014, because the eurozone crisis will hold back investment in the UK. Even if a solution is found, it predicts that Britain's economy will still only grow by 1.75 per cent in 2012 and 3.8 per cent in 2014. Nor is it optimistic about job prospects, stating that unemployment will rise by a further 300,000 to just below three million people as the private sector fails to compensate for public sector job losses.

The CEBR reiterates these findings. It revised down its forecast for growth for 2012 from 0.7 per cent growth to a decline of 0.4 per cent, with a risk of decline of 1.1 per cent if the situation in the eurozone worsens.

For the time being, then, there is little light at the end of the tunnel. Amid these depressing forecasts about growth and unemployment, IPPR North has humanised the statistics by analysing ONS figures to show that in some areas of the UK, there are 20 jobseekers for each vacancy. In the worst affected area, West Dunbartonshire, there are 20 for each vacancy, while in London, Lewisham has 16 jobseekers for every job. It found that the national average was four jobseekers for every vacancy.

If these predictions are borne out -- and past example suggests that the most pessimistic forecasts tend to be the correct ones -- then it will be the double dip recession that the New Statesman has been warning of since March 2009. In October 2009, our Economics Editor David Blanchflower wrote:

Lesson number one in a deep recession is you don't cut public spending until you are into the boom phase. John Maynard Keynes taught us that. The euro area appears to be heading back into recession and the austerity measures being introduced in certain eurozone countries, especially those in Germany, will inevitably lower UK growth, too. It is extremely unlikely, therefore, that net trade will leap to our rescue. taught us that. The consequence of cutting too soon is that you drive the economy into a depression, with the attendant threats of rapidly rising unemployment, social disorder, rising poverty, falling living standards and even soup kitchens.

The government's sole economic priority thus far has been balancing the books. Will they come up with a plan for growth, faced with more and more bleak predictions? Somehow, it doesn't seem likely.

 

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.