ONS: GDP down by 0.3% in Q4 2012

Estimates present problems for the government.

The ONS has released the preliminary estimates for GDP growth in the fourth quarter of 2012: it fell by 0.3 per cent. That's worse than the OBR/Treasury's forecast of a 0.1 per cent contraction, but the Treasury says the news was "not unexpected".

The OBR will be able to defend its record somewhat, because 0.2 percentage points of the contraction are due to a significant reduction in oil and gas extraction. The ONS explains that this is resulting from "an extended and later than usual maintenance period at the UK’s largest North Sea oil field". Expect a number of commentators to rapidly become experts on North Sea oil, and why the shock should or shouldn't let the chancellor off the hook.

Nonetheless, this represents the only the latest time the OBR has been overly optimistic about GDP projections. Economic forecasts are usually wrong; but they are usually wrong symmetrically. The persistent bias — mathematically, that is — must eventually raise questions about the OBR's model.

The hit to oil extraction led to mining output falling by 10.2 per cent in the quarter, the biggest decline on record, and led to the production sector overall falling by 1.8 per cent — a contraction which was exacerbated by the continued steady contraction in manufacturing, down 1.5 per cent.

The news was less bad in other sectors, but agriculture, forestry and fishing experienced still a contraction of 0.6 per cent, while the service sector was flat. Some of that stagnation in services may be due to some "fall-back" following the Olympic games, as the impact of spending being concentrated on one period comes back to bite. The one top-level sector which experienced growth was construction, where output increased by 0.3 per cent.

The overall contraction presents the strong possibility that the UK is going to have a "triple-dip" recession, if the next quarter is negative as well. Such a sustained period of bouncing between recession and mere stagnation would be unprecedented in recent economic history. Even if we don't have a triple-dip, growth for the whole of 2012 remains exactly flat, and there are no high expectations for growth going in to 2013. We have a corrugated economy, going up and back down periodically, but with a clear — and terrifying — trend of stagnation.

The Chancellor in Davos in 2012. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Lord Sainsbury pulls funding from Progress and other political causes

The longstanding Labour donor will no longer fund party political causes. 

Centrist Labour MPs face a funding gap for their ideas after the longstanding Labour donor Lord Sainsbury announced he will stop financing party political causes.

Sainsbury, who served as a New Labour minister and also donated to the Liberal Democrats, is instead concentrating on charitable causes. 

Lord Sainsbury funded the centrist organisation Progress, dubbed the “original Blairite pressure group”, which was founded in mid Nineties and provided the intellectual underpinnings of New Labour.

The former supermarket boss is understood to still fund Policy Network, an international thinktank headed by New Labour veteran Peter Mandelson.

He has also funded the Remain campaign group Britain Stronger in Europe. The latter reinvented itself as Open Britain after the Leave vote, and has campaigned for a softer Brexit. Its supporters include former Lib Dem leader Nick Clegg and Labour's Chuka Umunna, and it now relies on grassroots funding.

Sainsbury said he wished to “hand the baton on to a new generation of donors” who supported progressive politics. 

Progress director Richard Angell said: “Progress is extremely grateful to Lord Sainsbury for the funding he has provided for over two decades. We always knew it would not last forever.”

The organisation has raised a third of its funding target from other donors, but is now appealing for financial support from Labour supporters. Its aims include “stopping a hard-left take over” of the Labour party and “renewing the ideas of the centre-left”. 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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