The Staggers

The New Statesman’s rolling politics blog

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 for growth?

By Samira Shackle Published 16 January 2012 12:37

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.

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Tags: Recession

More from Samira Shackle

45 comments

Wed, 2012-01-18 19:38 — mike555

@Matt

Remind us what effect the housing boom post 1997 had on the poor, the housing boom I've been so against? I've asked you several times but each time you avoid answering, funny that.

Mon, 2012-01-23 19:39 — mike555

@Matt

Looks like I need to remind you about the 80's boom and the 1997 boom again.

Using Nationwides Real House Prices (i.e. adjusted for inflation) the highest they got in the 80's was 127.9k, the highest they got under New Labour was 209.9k.

In Q2 1997 the Real House Price was 87.9k. What are your thoughts on the effect the post 1997 boom had on the poor and their ability to raise families and buy family homes?

Just to remind you again, I think any house price boom above and beyond inflation is a disaster, including the one under the Tories.

Mon, 2012-01-16 16:13 — saltyseadog1

First it was Labours fault and now it's the Eurozone you must think the people are as stupid as the ConDems appear to believe.

Mon, 2012-01-16 16:22 — postageincluded (not verified)

The Item Club uses the same model for its predictions as the Treasury and the OBR, both of which erred on the side of optimism in their predictions last year. So we must assume that the true picture is even worse than the Item Club thinks. Depressing.

Sun, 2012-01-22 17:47 — matthew fox (not verified)

Bozo555, I see you have given up the fight.

There was an explosion of house prices in the 1980s Bozo555, and you have never had an opinion on that, surprise, suprise.

"You're bound to get some sort of a recovery if you throw enough money at it"

More weasel and empty words from you.

What recovery you simpleton, did't you get the email? unemployment at 2.685 Million? Exports down Imports up.

Wed, 2012-01-18 20:18 — matthew fox (not verified)

Yes I am laughing at your comical posts Bozo555, it must pretty disheartening to look back these fantasies.

Correct at the time, really? in what way are they correct?

Lets look at this funny gag Bozo555, walk with me old bean.

23 July 2010 at 17:51

GDP figures today are more evidence that 0.5% interest rates are innappropriate.

If the economy is in such good shape, surely the BofE would have raised interest rates Bozo555, or have I just answered my own question?

Mon, 2012-01-16 17:12 — Richard SM (not verified)

@Jimmywitz
Keynes only applies if you think growth will return. We keep being told the government is "re-balancing" the economy. I suspect they mean re-balancing it with China and India.

Mon, 2012-01-16 17:14 — Livers (not verified)

Here we go ... Tories will blame the Eurozone, then the Olympics, then the Jubilee, then Snow.

And they are the part of PERSONAL RESPONSIBILITY?

HA!

Tue, 2012-01-17 17:09 — matthew fox (not verified)

Businesses need strong stable goverment, if that is the case, why is business confidence down the toilet?

One of the rationale from the Right in May 2010, was that the country needed a stable government to breed " Business Confidence "

If business confidence isn't there, surely the rationale for this government disappears.

Mon, 2012-01-16 18:03 — Benjamin Rae (not verified)

One thing is for sure, it's not the government's or Osborne's fault. What do people expect? You can't expect the chancellor or govt to take responsibility for their decisions after nearly two years in power.
That's just unreasonable.

Mon, 2012-01-16 18:04 — super huey (not verified)

@Livers
you got it wrong... its Labour, then Brown, then balls, then snow, then eurozone... and the rest is yet to come... Point is.. Labour have to bare some of the blame and whoever differs is a lefty idiot in denial.

Wed, 2012-01-18 21:25 — mike555

@Matt

You may laugh but you have no answers again I see. Interest rates have never been this low , or for so long, we're still not even in a recession, never mind a depression, house prices remain well overpriced and inflation is still more than double target.

Explain how any of my posts is wrong? Then try and answer a question yourself for a change.

I've been a long time critic of the BoE, I think peoples debts are being inflated away while rates are kept artificially low, so explain your logic in this post on "Too big to fail becomes too big to bail"?:

"You need to put your mervyn king pom poms down and head back to Conservativehome, there are too many adults on this website, you wont last two minutes on here."

So make your mind up , am I a BoE cheerleader or not? I can tell you I'm not but maybe you know better?

Wed, 2012-01-18 21:38 — mike555

@Matt

I notice you haven't posted up any of my comments where I'm supposed to have spoken for others. Perhaps you're confusing my opinion with speaking for others?

Mon, 2012-01-16 18:20 — Benjamin Rae (not verified)

As opposed to those geniuses advocating an ''expansionary fiscal contraction'. Labour are hardly left wing. They haven't been for some time.
The right aren't short of morons though.

Wed, 2012-01-18 22:28 — matthew fox (not verified)

Bozo555, please keep up with what you have written.

When you wrote your comical words in July 2010, the Q2 figures came in at 1.1%, is it coming back to you?

At that moment in time, Osborne was bragging about the UK economy and would have taken credit for sun shining if he could.

In Q3 2010 GDP growth slipped to 0.7%, and in Q4 2010 it contracted by 0.5%

I find it that you are prone to rash judgements, based more wacky theories then facts. You had the arrogance to think the economy was going to boom, which it didn't thanks to Osborne.

Could you explain what happened to the " Another Housing Boom "?

Can you remind me what happened to house prices in 2010, or do you need that information spoon fed to you as well?

Thu, 2012-01-19 23:22 — matthew fox (not verified)

Bozo555, please stop running away from your wacky theories, it is understandable I suppose.

What on earth is a "Mini Boom".

No Bozo555, you decided to pretend everything was happy with the world, especially when you used the term

" The positive economic news keeps coming " ?

To me, it seems you prefer the bad economic data, and scratch around for any news which supports Osborne, why is that Bozo555?

Tue, 2012-01-17 19:12 — mike555

Being politically neutral I find the blame game quite interesting, it's strange how after 10 years in power the crisis of 2007 onwards was all a "global crisis", now it's all the fault of the goverment.

Both sides are as bad as each other.

Tue, 2012-01-17 20:03 — matthew fox (not verified)

"Politically Neutral" lol haha hehe.

Come on Bozo555, who actually feeds you?

A better description would be economically inept and socially neutered.

What happened to the " Export Led Recovery "?

Who do you think the 600 people just sacked Premier Foods will be blaming.

Didn't you get the email Bozo555, unemployment is a 17 year high?

We are in year 2 of a eurozone crisis, when will your friend Osborne get around to solving it?

Tue, 2012-01-17 20:14 — matthew fox (not verified)

Super sorry it should read " just sacked by Premier Foods "

Sun, 2012-01-22 23:55 — mike555

@Matt

"There was an explosion of house prices in the 1980s Bozo555, and you have never had an opinion on that, surprise, suprise. "

Truly dismal, I was at school in the 80's, even then I have commented on it several times already as you well know, why do say I never had an opinion on it when I have answered your questions on the subject several times?

"More weasel and empty words from you. "

Still no answers I see, what's your opinion on the housing boom under New Labour and the effect it had on the poor? Don't you have one? I've asked you many times.

Mon, 2012-01-23 00:13 — mike555

@Matt

"What recovery you simpleton, did't you get the email?"

More juvenile insults as ever I see, you're the one who posted this, which is what I was commenting on:

"Your also fail to mention, that it was Osborne who was dining out the the Labour recovery plan, but claimed credit for it. He actual justified his Emergency Budget, on the strength of the good economic data, which was knocking around. "

Tue, 2012-01-24 23:46 — mike555

@Dizzy

I'm surprised more of the regulars haven't said the same. If it weren't for Matt's utterly dismal ridicule I would have posted about a tenth of the posts I have posted.

Stick to the facts and you can't go wrong.

Tue, 2012-01-17 21:32 — mike555

Oh look its Matt, the Tories are just as bad as New Labour were on my main subject of interest i.e. housing.

I like the way you criticize people for speaking for others, then appear to do the same yourself. I have never voted for the Tories, as I've told you many times before.

As ever the points I make seem to be lost on you.

Mon, 2012-01-16 20:58 — E Hart (not verified)

@jimmywitz I couldn't agree more. It is extraordinary that the US, the UK and Eurozone are all locked on the same disastrous course. They seem unaware that their policies will coalesce in a mighty damaging depression.

"Expansionary austerity" is a canker which will become worse over time. As unemployment gets worse, revenues decrease, company failures rise and the deficit increases the devotees of this policy will still claim that there is no alternative. The signs from Greece, Italy, Spain, Portugal and Ireland etc. are already pointing to the shape of things to come. It's very sad.

Fri, 2012-01-20 13:27 — mike555

@Matt

Dismal as ever.

"To me, it seems you prefer the bad economic data, and scratch around for any news which supports Osborne, why is that Bozo555?"

Makes no sense, I posted up postive stories not negative ones. The reason I did so was because I think rates are too low, I'm not sure that the Chancellor thinks we need higher rates so I don't see how I'm supporting him, perhaps you can explain , or not as usual?

Tue, 2012-01-17 21:58 — matthew fox (not verified)

No your super wrong as usual Bozo555, I don't pretend to appoint myself as a spokesperson, unlike you.

Your main area of interest is whining, and ignoring the facts.

Here are funny comments from you Bozo555. You really need to get out of the prediction game.

mike555
23 July 2010 at 17:51

GDP figures today are more evidence that 0.5% interest rates are innappropriate.

mike555
22 January 2010 at 17:30

The incredibly low rates we have are already fuelling another house price boom, not only do we have rates at an all time low but we have QE on top.

The addiction to borrowing has to stop and rates need to rise to prevent another debt driven crisis. We were told lessons would be learned but we seem determined to make the same mistakes all over again only more so.

Tue, 2012-01-17 22:09 — matthew fox (not verified)

Just remind me how politically neutral you are Bozo555?

mike555
02 December 2010 at 19:40

It was only in August George was being criticized for talking the economy down in this column, now it looks like he's being criticized for talking it up??

Meanwhile the positive economic news keeps coming, manufacturing growing at highest rate for 16 years figures showed yesterday. The raft of recent news, including inflation still well above target, just highlights how innappropriately low interest rates are, never mind more QE. Hopefully QE will be consigned to the dustbin.

A slowdown in consumer spending isn't all bad considering the indebtedness of the consumer in the UK and the fact that we've been living beyond our means for too long.

Bozo555 just remind me the current state of British Manufacturing?

Mon, 2012-01-16 23:02 — David Lindsay

Of course we are back in recession. Did you notice that we had ever left it? No, neither did I. Whereas Ed Balls now agrees with that brilliant economic strategist, George Osborne.

For how much longer will anyone continue to vote for the party of Ed Balls, as growing numbers had been doing up until this development? For how much longer will anything continue to fund that party? Not "any party". That party.

Mon, 2012-01-16 23:06 — Mrs.Josephine Hyde-Hartley (not verified)

Where is the governments plan for growth? With any luck it'll soon be launched upon the high seas, in ship shape form - a new vessel fit for HRH The Queen..and/or anyone else who may be concerned or amused..Full of books and other national treasures to help serve a positively diverse range of interests. The Royal yacht Universal anyone?

What a wonderful birthday gift.

Fri, 2012-01-27 22:16 — mike555

What a suprise , no answers from Matt yet again. This is becoming embarrassing.

Thu, 2012-01-19 14:10 — mike555

@Matt

No answers again I see.

"Could you explain what happened to the " Another Housing Boom "?"

House prices had a mini boom after the bailouts and after rates were slashed and have held up remarkably since, as lots of the monthly indices have stated.

The point I was making at the time on the economy was that some articles were focussing purely on the negative stories when there were lots of positives stories out there too like the ones I mentioned.

Dizzy dummy (no, not me, the Tories)'s picture

Tue, 2012-01-24 14:05 — Dizzy dummy (no, not me, the Tories) (not verified)

If you have something useful to say to counter Mike, say it. Writing "bozo" several times per post is like waving a big banner saying "I'm a troll having a flame game."

As anyone with a bit of internet experience knows, when you're flaming, truth and honesty are not just not required but are a poor choice of weapon.

Therefore, having identified yourself as a flamer by using slurs like "bozo" and "simpleton", it can automatically be taken as likely that you are a liar or spin merchant or whatever - but not that you are in an honest exchange of ideas. You lower your credibility considerably.

There's plenty of that crap at a million other sites. It's a pity that you're peddling it at this one. I visit this magazine perhaps once or twice a fortnight. I like to read the comments of an article to become additionally informed and to take a pulse. I don't wish to wade through a flood of distracting childish flame posts like yours. I'm pretty sure that I speak for other relatively new readers.

Of course, if you *are* just being a troll and are happy to be seen as such, nobody can stop you, so do carry on and let this paper and its readers lose out.

Wed, 2012-01-18 14:46 — Daniel (not verified)

All this talk of 'it's not the government's fault' etc is nonsense. When Osbourne unveiled his grimm fairy tale of 'expansionary austerity' us 'brain dead Keynesians' (as the fuck-witted Tories called us) predicted the double-dip recession. We are well into a depression that will last many years.

Mon, 2012-01-23 15:02 — matthew fox (not verified)

Bozo555 opinions are like elbows, most people have them.

What opinion did you have on Mrs T housing boom, I will tell you what simple minded opinion you on it, you ignore it, saying it wasn't relevant and in the past, more weasel words Bozo555.

Is it coming back you Bozo555, another flashback on the way.

Wed, 2012-01-18 15:44 — Awake!

yes Daniel
perhaps you might like to read a newspaper or turn the telly on this year.

Fri, 2012-01-20 18:14 — matthew fox (not verified)

Dismal, that is your normal stock ball, which I normally push away with a rather elegant front foot shot Bozo555.

Positive stories are the only stories your prepared to put up
Bozo555, but they are pretty thin on the ground at the moment.

Your also fail to mention, that it was Osborne who was dining out the the Labour recovery plan, but claimed credit for it. He actual justified his Emergency Budget, on the strength of the good economic data, which was knocking around.

Just to make you aware, Osborne didn't become Chancellor until May 2010.

" You think " no way Jose Bozo555.

I have seen your thinking in action,and it's not pretty. We only have to look at your thinking about Inflation and the Inflation problem, to understand how backwards you are.

What is also the guff about George Osborne attitude to interest rates, you keeping going off on a tangent to disguise your poor analysis Bozo555.

As for this stupidity regarding the BofE, you must understand ( which is going to be hard for you ) my criticsim is aimed at Mervyn King, not the BOfE.

King endorsed the Osborne suicide plan in 2010, and has gone out of his way to criticise Labour ( just like you Bozo555)

Read below an interest article Bozo555, it seems me and Paul Krugman are on the same page,when it comes to King.

http://www.guardian.co.uk/business/2011/feb/18/ed-balls-warns-mervyn-kin...

Fri, 2012-01-20 18:58 — mike555

@Matt

As I've told you many times, I do not defend or support the Tories and have no need or desire to explain anything they do.

You're bound to get some sort of a recovery if you throw enough money at it.

Fri, 2012-01-20 19:08 — mike555

@Matt

"What is also the guff about George Osborne attitude to interest rates"

You keep calling him my friend - and you criticize me for thinking for others (even though I don't).

I think rates have been too low which is why I posted up some postive stories. All I hear from the Tories is about keeping rates down, the opposite of what I think.

If you can't see beyond Tory vs New Labour that's your problem, I don't like either of them.

I criticized the explosion in house prices and debt, it was obvious it was a problem, if people listened to people like me back in the early 2000's things might have been better. I don't think things would have been different if the Tories had been in.

Mon, 2012-01-16 13:52 — Arturo Bandini (not verified)

This, I think you will find, is all Gordon Brown's fault.

I heard he asked for a go on the controls of a cruise ship the other day.

Mon, 2012-01-23 17:56 — mike555

@Matt

"Bozo555 opinions are like elbows, most people have them."

No answers again I see. I've told you my opinion on the 80's boom, I can post you several links to comments of mine on the subject if you like?

Can you post links to your opinion on the boom from 1997 onwards? I've asked several times for your opinion but don't remember you ever answering, funny that.

The 80's housing boom has been and gone, the last boom which was much bigger is still with us as I showed you with the Real House Price figures, yet all you can do is bring up the 80's.

"more weasel words Bozo555"

I'm not the one who avoids every question asked.

Mon, 2012-01-16 14:12 — super huey (not verified)

Unsurprising since our economy is being dictated by the actions in the eurozone. It's all fair to say... in hind sight etc... but who would've guessed the incompetence of these so called world leaders.

Wells things could be worse... we could be Greece.

Wed, 2012-01-18 18:01 — mike555

@Matt

"No your super wrong as usual Bozo555, I don't pretend to appoint myself as a spokesperson, unlike you. "

How do you explain this then from "Too big to fail becomes too big to fail":

"I can assure you Mikey, I am on the money when it comes to you. As an unrepantent Thatcherite, who has nothing but contempt for the poor, unemployed and elderly, the last thing I need from you is best wishes, you should save that for the 1 million who is going to lose their jobs in 2011. "

Not sure how you came to those conclusions, each one is wrong.

Post up my comments where I'm supposed to have spoken for others so we can see what I actually said.

The comments of mine you posted up here were all correct at the time, haven't changed my opinion on low rates or QE either.