Another UK recession is 'not a foregone conclusion'

The BCC reckons that while there will probably be a quarter of contraction during 2012, it won't necessarily turn into a full-blown recession.

by Emma Haslett
Last Updated: 03 Jul 2012
New figures by the British Chambers of Commerce suggest that, while the organisation expects there to be ‘at least’ one quarter of stagnation – if not contraction – during the first half of 2012, another recession ‘is not a foregone conclusion’. Apparently, while everyone from manufacturers to the service sector are expecting to make cutbacks at the moment, as long as George Osborne delivers on the promises he made in his Autumn Statement, things shouldn’t be as bad as last time. Which is about as optimistic as economic forecasting gets at the moment…

According to the survey of more than 6,000 businesses, the economy has ‘significantly weakened’ over the past few months (tell us something we don’t know). That’s illustrated by domestic orders for home deliveries from manufacturers, which were ‘weak’ during the last quarter of 2011, and dropped by nine percentage points to -12% for forward-looking orders (anything below zero suggests a contraction). Things aren’t much better in the service sector, either, where the balance of home orders dropped by six points to -9%. All three of those figures were at their lowest level since the third quarter of 2009.

Similarly, businesses aren’t particularly confident about their prospects of creating jobs: among manufacturers, those who expected to be able to take on new recruits dropped by 18% to -8% (ie. the majority expect to have to cut jobs). The number of service businesses planning to create jobs also fell, by four percentage points to 2% - although at least that suggests there will be a few new jobs available in the industry over the next few months.

Still: no wonder the BCC reckons at least one quarter of contraction is ‘very likely’ in the first half of 2012: ‘The results… are a cause for concern,’ said BCC director general John Longworth. But that doesn’t necessarily mean a recession’s on the cards: after all, it’s not a recession until there have been two consecutive quarters of contraction, and although businesses aren’t optimistic, the situation is nowhere near as bad as during the ‘worst phase’ of the last downturn. So at least we’ve got that to cling on to.

But to avoid a recession, added Longworth, the Government needs to deliver on its promises as quickly as possible. ‘Action is needed urgently to tackle short-term stagnation and a lack of business confidence,’ he said. ‘Ministers need to move faster on promises made… to improve the flow of credit to businesses, reforms of our complex planning system, and investment in infrastructure.’ Not too much to ask, then…
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