Five questions answered on the shrinking UK economy

How do the figures compare with what was expected?

Figures released this morning indicate the UK could be heading for another recession. We answer five questions on the latest economy figures.

How much has the economy shrank by?

Figures released this morning by the Office of National Statistics show that the economy, or Gross Domestic Product, has shrank by 0.3 per cent in the last three months of 2012.

In the three months prior to this, the economy grew by 0.9% which is believed to have been boosted by the Olympic games.

This is the first estimate of how the economy performed in the fourth quarter, and is subject to at least two further revisions as further data is collected.

What is being cited as the cause of this latest shrinkage?

The ONS are blaming maintenance delays at the UK’s largest oil and gas field in the North Sea, which resulted in a fall of output from the extractive industries. Mining and quarrying output fell by 10.2 per cent, which knocked 0.18 per cent off of GDP.

Another industry that faired badly in the last quarter is manufacturing which fell by 1.5 per cent.

What does this mean for the outlook of the economy?

This means that the country could be heading for a third consecutive recession. Factors such as heavy snow could also hasten the economy into yet another recession. 

How do the figures compare to what was expected?

The figures are said to be worse than expected. Sir Mervyn King, the Bank of England Governnor, has said he only expects a gentle recovery this year, although now even this is looking increasing unlikely.

The International Monetary Fund did cut its 2013 forecast for British economic growth to 1pc from 1.1pc predicted in October, indicating slow growth in the UK economy was anticipated.

What reaction have economists had to these recent figures?

Jonathan Portes, an economist from the National Institute of Economic and Social Research, speaking to the BBC said:

"Underlying it, ignoring all the special factors, what we see is the economy is not delivering the sustainable growth that we would normally see at this point in the cycle.”

He added: "This is due to the [UK] government's policies and the failure of governments in the eurozone.

"They should not have cut the deficit so quickly and before the recovery was sustained."

Meanwhile the Treasury said in a statement:

"It confirms what we already knew - that Britain, like many European countries, still faces a very difficult economic situation.

"While the economy is healing, it is a difficult road."

Photograph: Getty Images

Heidi Vella is a features writer for Nridigital.com

Photo: Getty
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Leader: Corbyn’s second act

Left-wing populism is not enough – Labour must provide a real alternative.

Since Jeremy Corbyn first stood for the Labour leadership he has been fortunate in his opponents. His rivals for leader ran lacklustre campaigns in 2015 and failed to inspire members and activists who longed to escape the tortured triangulations of the Ed Miliband era. Later, at the 2017 general election, Mr Corbyn was confronted by a dismal Conservative campaign that invited the electorate’s contempt. Theresa May’s complacency – as well as Mr Corbyn’s dynamic campaign –has helped propel the Labour leader to a position from which he could become prime minister.

With greater power, however, comes greater responsibility. Mr Corbyn’s opponents have for too long preferred to insult him or interrogate his past rather than to scrutinise his policies. They have played the man not the ball. Now, as he is a contender for power rather than merely a serial protester, Mr Corbyn’s programme will be more rigorously assessed, as it should be. Over the months ahead, he faces the political equivalent of the “difficult second album”. 

Labour’s most electorally successful – and expensive – election policy was its pledge to abolish university tuition fees. Young voters were not only attracted by this promise but also by Mr Corbyn’s vow, in an interview with the free music paper NME, to “deal with” the issue of graduate debt. The Labour leader has since been accused of a betrayal after clarifying that the phrase “to deal with” did not amount to a “commitment” to wipe out student debt. In an interview with the BBC’s Andrew Marr, he explained that he had been “unaware of the size of it [graduate debt] at the time”. (The cost of clearing all outstanding student debt is estimated at £100bn.)

In fairness to Mr Corbyn, Labour’s manifesto said nothing on the subject of existing student debt (perhaps it should have) and his language in the NME interview was ambiguous. “I’m looking at ways that we could reduce that [graduate debt], ameliorate that, lengthen the period of paying it off,” he said. There is no comparison with the Liberal Democrats, who explicitly vowed not to raise tuition fees before trebling them to £9,000 after entering coalition with the Conservatives in 2010. Yet the confusion demonstrates why Mr Corbyn must be more precise in his policy formulations. In a hyperactive media age, a single stray sentence will be seized upon.

At the general election, Labour also thrived by attracting the support of many of those who voted to remain in the European Union (enjoying a 28-point lead over the Conservatives among this group). Here, again, ambiguity served a purpose. Mr Corbyn has since been charged with a second betrayal by opposing continued UK membership of the single market. On this, there should be no surprise. Mr Corbyn is an ardent Eurosceptic: he voted against the single market’s creation in 1986 and, from the back benches, he continually opposed further European integration.

However, his position on the single market puts him into conflict with prominent Labour politicians, such as Chuka Umunna and the Welsh First Minister, Carwyn Jones, as well as the party membership (66 per cent of whom support single market membership) and, increasingly, public opinion. As the economic costs of Brexit become clearer (the UK is now the slowest-growing G7 country), voters are less willing to support a disruptive exit. Nor should they. 

The worse that Britain fares in the Brexit negotiations (the early signs are not promising), the greater the desire for an alternative will be. As a reinvigorated opposition, it falls to the Labour Party to provide it. Left-wing populism is not enough. 

The glory game

In an ideal world, the role of sport should be to entertain, inspire and uplift. Seldom does a sporting contest achieve all three. But the women’s cricket World Cup final, on 23 July at Lord’s, did just that. In a thrilling match, England overcame India by nine runs to lift the trophy. Few of the 26,500 spectators present will forget the match. For this may well have been the moment that women’s cricket (which has for so long existed in the shadow of the men’s game) finally broke through.

England have twice before hosted women’s World Cups. In 1973 matches were played at small club grounds. Twenty years later, when England won the final at Lord’s, the ground was nearly empty, the players wore skirts and women were banned from the members’ pavilion. This time, the players were professionals, every ticket was sold, and the match was shown live around the world. At the end, girls and boys pressed against the advertising hoardings in an attempt to get their heroes’ autographs. Heather Knight, Anya Shrubsole, Sarah Taylor, Tammy Beaumont, and the rest of the team: women, role models, world champions. 

This article first appeared in the 27 July 2017 issue of the New Statesman, Summer double issue