The Office for National Statistics produced the long-awaited news this morning: Britain is officially out of recession, with the economy growing by (an admittedly measly) 0.1% between October and December. That’ll be music to the ears of Chancellor Alistair Darling, whose prediction that we’d emerge from the recession before the end of 2009 has – just about – come true. But for the rest of us, the prospect of more redundancies, tax hikes and price rises in 2010 are a disincentive to start popping the champagne corks…
Of course it’s good news that we seem to be coming out the other side of what has been the longest recession on record. According to the ONS, the British economy shrank by a whopping 6% from its 2008 peak, including a 4.8% slump last year alone. So any kind of positive growth counts as a step in the right direction. And it means that we’ve finally joined the club of big economies that have emerged from recession (albeit rather later than most of them).
The bad news is that today’s GDP figure was much lower than the 0.4% the City was expecting. And this is just an initial estimate; the ONS figure could yet be revised downwards (or upwards, to be fair) in the coming months; this tends to happen about two-thirds of the time, and the revisions are usually 0.1% or 0.2% in either direction. Indeed, common sense would seem to suggest that when you’re doing a calculation as complicated as this, 0.1% is barely statistically significant. And while we’d never be so cynical as to suggest that the Treasury’s public prediction (of a return to growth in 2009) had any influence on the outcome, there was clearly a lot of pressure on the ONS to produce a positive number, with an election looming.
But number-crunching aside, the more important question is whether this means anything, in real terms. In practice, with taxes likely to rise and wage growth still sluggish at best, most of us might actually feel poorer this year than we did in 2009 (especially if the Bank of England has to put up interest rates to combat inflation). As companies try to rebuild inventories, squeezing their cash positions, the chances are that we’ll see more company failures, bringing more job losses. And since the Government’s stimulus money (notably the car scrappage scheme) is the only reason the economy is back in positive territory, the picture will look a lot less cheery once this disappears.
We’re with the CBI’s Richard Lambert on this one: the key is for whoever’s in charge to restore a bit of stability. Lambert reckons that if the private sector can drive 3% growth over the next five years (a big if, admittedly), we’d see a fast recovery – but that will only happen if the Government makes life a lot easier and more predictable for businesses.
In today's bulletin:
The recession is over - or is it?
Apple reports record profits as recession fails to bite
Tough road ahead for Jaguar Land Rover after Smith's surprise exit
Employees can't get no satisfaction, says CIPD
How the public sector has been propping up the UK economy