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.

Getty
Show Hide image

The Brexit select committee walkout is an ominous sign of things to come

Leavers walked out of a meeting of Hilary Benn's "gloomy" committee yesterday. Their inability to accept criticism could have disastrous consequences

“Hilary Benn isn’t managing a select committee. He’s managing an ecosystem.” That was the stark verdict of one member of the Commons' Brexit committee on its fitness for purpose yesterday. If its meeting on the eve of Article 50 is anything to go by, then Benn’s fragile biome might already be damaged beyond repair.

Unhappy with the content of its “gloomy” provisional 155-page report into the government’s Brexit white paper, leavers on the committee walked out of its meeting yesterday. The committee is a necessarily unwieldy creation and it would probably be unreasonable to expect it to agree unanimously on anything: it has 21 members where others have 11, so as to adequately represent Leavers, Remainers and the nations.

Disagreements are one thing. Debate and scrutiny, after all, are why select committees exist. But the Brexiteers’ ceremonial exodus augurs terribly for the already grim-looking trajectory of the negotiations to come. “As I understand it, they don’t like analysing the evidence that they have,” another pro-Remain member of the committee told me.

Therein lies the fundamental weakness of the Brexiteers’ position: they cannot change the evidence. As was the case with the 70 MPs who wrote to Lord Hall last week to accuse the BBC of anti-Brexit bias, they assume a pernicious selectivity on the part of Remainers and their approach to the inconvenient facts at hand. None exists.

On the contrary, there is a sense of resignation among some Remainers on the Brexit committee that their reports will turn out to be pretty weak beer as a consequence of the accommodations made by Benn to their Eurosceptic colleagues. Some grumble that high-profile Brexiteers lack detailed understanding of the grittier issues at play – such as the Good Friday Agreement – and only value the committee insofar as it gives them the opportunity to grandstand to big audiences.

The Tory awkward squad’s inability to accept anything less than the studied neutrality that plagued the Brexit discourse in the run-up to the referendum – or, indeed, any critical analysis whatsoever – could yet make an already inauspicious scenario unsalvageable. If they cannot accept even a watered-down assessment of the risks ahead, then what happens when those risks are made real? Will they ever accept the possibility that it could be reality, and not the Remain heretics, doing Britain down? How bad will things have to get before saving face isn’t their primary imperative?

Yesterday's pantomime exit might have been, as one committee member told me, “hysterically funny”. What’s less amusing is that these are the only people the prime minister deigns to listen to.

Patrick Maguire writes about politics and is the 2016 winner of the Anthony Howard Award.