UK economy dips 0.3% in Q4

THE UK’s economy contracted by 0.3% in the final quarter of 2012, increasing the chances of a triple-dip recession later this year.

Official figures from the Office for National Statistics show output shrank following 1% growth in Q3, although that figure was artificially inflated by the Olympic impact.

Joe Grice, chief economist of the ONS, said production output had fallen by 1.8% over the period with manufacturing shrinking 1.5%.

The service sector, the main one to benefit from the Olympics, was flat but there was better news for the construction sector, which rose 0.3%.

Mr Grice said ticket sales included in the third quarter figure were not present in Q4 and this had impacted figures by around 0.2%.

He said the broad picture in underlying terms showed growth close to flat and this extended a trend seen for some time.

Year-on-year Q4 figures were flat and he said 2012 as a whole saw zero growth.

Richard Halstead, Midlands Region Director at EEF, the manufacturers’ organisation, said: “There are no positive takeaways from today’s first estimate of GDP in the final months of last year.

“Even assuming some unwinding of activity from the Olympics boost in the previous quarter, this still leaves no real signs of underlying growth in the economy. The news from industry was particularly weak, with November’s sharp drop on output contributing to a rather grim fourth quarter and leaving the overall picture for manufacturing in 2012 the weakest since 2009. 
 
“Still there are some factors which might indicate that 2013 will not be as bad as 2012 – the big Euro-exit risk has diminished, the employment picture is better than expected and manufacturers are continuing to look to new markets for growth. That said, government must hit the accelerator on getting capital projects moving and be clearer about its economic priorities to give businesses more confidence to invest for the future.”

John Cridland, CBI Director-General, added: “After a difficult year, the UK economy has ended on a disappointing note.
 
“We think growth will continue to be fairly flat through the winter but momentum will gradually build later in the year, as the global economy picks up a little and confidence lifts.” 

Louise Bennett, chief executive of the Coventry and Warwickshire Chamber of Commerce, said: “The statistics show that we are still some way off a sustained recovery following the worst economic crisis many can remember.

“And, of course, the economic contraction in the final quarter of 2012 means we could face the prospect of a triple-dip recession.

“Some believe that the GDP figures are too negative when compared with other surveys and statistics – certainly the unemployment figures and our own Quarterly Economic Survey don’t suggest a contracting economy.

“I do believe that talk of a recession really put the fear into businesses four or five years ago but we have been living with these words for several years now and, in many cases, companies take the attitude that they have to control their own destiny rather than be bogged down by the wider issues.

“That said, regardless of whether we saw growth of 0.3 per cent or a contraction of 0.3 per cent, the importance of the job in hand remains the same.

“The economy needs to be rebalanced. We need to see more people starting businesses, we need to see more companies exporting and we need to see firms given the freedom and the tools to expand and take on new staff.”