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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On Brexit, David Cameron knows exactly what he's doing

It's not a dead cat - it's about disarming the Leave campaign. 

If you’re explaining, you’re losing. That’s the calculation behind David Cameron’s latest entry into the In-Out (or Remain-Leave in new money) battle. The Prime Minister has warned that were Britain to leave the European Union, the migrant camp at Calais – popularly known as “the Jungle” – could move to Britain. But Eurosceptic campaigners have angrily denounced the remarks, saying that there’s little chance of it happening either way.  

Who’s right? My colleague Henry Zeffman has written a handy explainer of the ins and outs of the row, but the short version is: the Eurosceptic campaigners are broadly right.

But the remarks are very far from a gaffe by Downing Street or Cameron, and they aren’t a “dead cat” strategy – where you say something offensive, prompting a debate about that instead of another, trickier issue – either.

Campaigners for Remain have long been aware that immigration remains their glass jaw. The line wheeled out by Cameron has been long-planned. Late last year, senior members of the In campaign discussed what they saw as the danger points for the campaign. The first was a renegotiation that managed to roll back workplace rights, imperilling the support of the Labour party and the trade unions was one – happily avoided by Cameron’s piecemeal deal.

That the deal would be raked over in the press is not considered a risk point. Stronger In has long known that its path to victory does not run through a sympathetic media. The expectation has long been that even substantial concessions would doubtless have been denounced by the Mail, Telegraph and Sun – and no-one seriously expected that Cameron would emerge with a transformative deal. Since well before the general election, the Prime Minister has been gradually scaling back his demands. The aim has always been to secure as many concessions as possible in order to get an In vote – but Downing Street’s focus has always been on the “as possible” part rather than the “securing concessions” bit.

Today’s row isn’t about deflecting attention from a less-than-stellar deal, but about defanging another “risk point” for the In campaign: border control.

Campaign strategists believe they can throw the issue into neutral by casting doubt on Leave’s ability to control borders any better. One top aide said: “Our line is this: if we vote to leave, the border moves from Calais to Dover, it’s that simple.” They are also keen to make more of the fact that Norway has equally high levels of migration from the European Union as the United Kingdom. While In will never “own” the issue of immigration, they believe they can make the battle sufficiently murky that voters will turn to the areas that favour a Remain vote – national security, economic stability, and keeping people in their jobs.

What the row exposes, rather than a Prime Minister under pressure is a politician who knows exactly what he’s doing – and just how vulnerable the lack of a serious heavyweight at the top makes the Leave campaign(s). Most people won't make a judgement based on reading up the minutinae of European treaties, but on a "sniff test" of which side they think is more trustworthy. It's not a fight about the facts - it's a fight about who is more trusted by the public: David Cameron, or Iain Duncan Smith, Chris Grayling or Priti Patel? As one minister said to me: "I like Priti, but the idea that she can go against the PM as far as voters are concerned is ridiculous. Most people haven't heard of her." 

Leave finds itself in a position uncomfortably like that of Labour in the run-up to the election: with Cameron able to paint himself as the only option guaranteeing stability, against a chaotic and muddled alternative. Without a politician, a business figure or even a prominent celebrity who can provide credibility on the level of the Prime Minister, any row about whether or not Brexit increases the chances of more migrants on Britain’s doorsteps helps Remain – and Cameron. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.