25 Apr 2012

These GDP figures are terrible news for the coalition

In the end, it wasn’t marginal. This morning GDP figures show Britain clearly back in recession, the dreaded double dip, with GDP in key one at -0.2 per cent.

In the past bad figures like this have been the subject of attempts to write them off, to suggest that they’re in some way anomalous. No room here, I’m afraid. As the chief economist of the ONS told me this morning, “There are no special factors.”

This figure is driven by poor performance of the construction sector, which fell a whopping -3 per cent in the quarter. And that in particular is the focus of some controversy because many construction firms say it doesn’t reflect more positive news they’re hearing.

But the ONS pointed specifically to weakness in public sector construction, so that is government infrastructure spending. The ONS also mounted a robust defence of its construction data, saying 8,000 respondents were repeatedly asked for the picture.

It is, of course, possible that this fall will be revised away, although that has not been the pattern in the past few quarters. But this figure does shine a light on the big picture, that there’s been almost no growth for two years. Indeed, in seven quarters since the government came to power, the economy has grown just 0.4 per cent. That compares to 4.3 per cent that was forecast in the coalition’s original deficit reduction plan of June 2010.

So that’s the big picture. It’s terrible news for the government, on top of everything else. They point to the eurozone and the fact that Holland and the Czech Republic are also in recession, and restate the notion that borrowing more would make the problem even worse.

But just a few days after George Osborne told me that the austerity argument had been “completely won”, these numbers will surely reopen the debate about this government’s economic policy.

Follow @faisalislam on Twitter.

18 reader comments

  1. Pete says:

    Balanced and objective as always…Does this man actually work for Labour or is it just a coincidence that he agrees with everything spouted out by Ed Balls?

    I honestly have yet to see this ‘commentator’ produce anything of balance in the last few years.

    1. Footprint says:

      Facts are facts. Full stop. Is it just coincidence that your comment using the words “Spouted out by Ed Balls” make me think you’re a Con-Dem supporter? I have honestly yet to see a better Political / Economics reporter on any other News programme in the UK. I’m pretty sure Faisal has both the ‘on the ground’ experience of the workings of such matters – along with the Academic credentials. This reply comes from an average person who has spent 30 years working in Business at all levels – shop floor to Management, a very, very keen eye on all things political etc since before i left school – and gained a Degree in Business Management, Economics & Law in my early 30’s.
      And yourself…?
      Both your paragraphs of ‘in-depth’ retorts are a joke. 44 words. How proud you must be of yourself. Must have had you sweating for hours over your computer.

    2. Philip says:

      I think if you took the time to read previous blogs by Faisal you’d find that he’s been critical of Balls as well. I for one am glad of the independence shown by C4 professionals. Long may it continue.

    3. sue_m says:

      Well said Footprint.

      Partiality cuts both ways as Vince Cable and Jeremy Hunt have proven but a fact is a fact despite politicians best efforts to spin it as something else.

    4. Pete says:

      I thank footprint for his comments but I think I’d prefer to listen to Pier Carlo Padoan.

      As for balance and objectivity, I do believe stephanie flanders discussion on this very topic represented a much more balanced and fair view from all sides over the last few weeks and months.

      I voted conservative at the last election and Labour the time before, and lib dem for my council. I am a floating voter sick of hearing singular cherished views, and I believe this commentator constantly peddles a view rather than offer objective commentary. I would not care to cast aspertions on your political affiliations and then recklessly attach them to some monochrome view. I would suggest that your reply betrays your excellent level of qualification in this area.

  2. Saltaire Sam says:

    If it weren’t so serious it would be laughable to hear Osborne and Cameron plead special circumstances like the eurozone crisis for the failure of their policies.

    This is the same pair who put the whole blame for Britain’s problems down to Gordon Brown while ignoring bank and financial service meltdowns around the world.

    They are the same people who wanted to leave Northern Rock to the markets, which would have created chaos.

    And these are the people who told us that their policies would take us out of recession and into growth, turning their back on policies that had 2% growth and declining unemployment.

    They were wrong. So are they willing to consider modifying those policies? No. The posh boys know best.

    Only an idiot keeps bashing his head against a wall believing against all evidence that it will cure his headache.

  3. petanikita says:

    we suffer from the tory ideology, we get misery they smirk and enjoy, posh boys with to much given to them to easy.

  4. gmbatho says:

    Please ignore my previous comment which I posted in error I apologise, I was wrong and having re read this blog it is a fair comment and appraisil, as usual.

  5. jamesh says:

    Faisal, I respect you as a reporter. But I am worried that you fail to see the other factors affecting the economy. Take companies like Amazon which is used by a great majority of people online. This company is failing to pay its taxes. If more and more transactions are done online and these businesses like Amazon are using the loopholes in the UK law the economy most certaintly will be affected.

  6. slash n burn says:

    Brown and Balls allowed a decade of unfettered debt accumulation and fraud.

    The only way to achieve growth is to allow the malinvestment of that decade to be worked out.

    That means slashing and burning the bloated public sector and requiring the private sector to honestly report its asset sheets. If the banks go bust so be it.

    It also means the construction industry is going to have to realise that 250k for a one bed flat isn’t sustainable.

    As long as we tolerate fraud and bubble-pricing we can look forward to a decade of dipping in and out of recession.

  7. Andrew Dundas says:

    Because it was an international crisis its origins were never properly reported.
    Consequently the myth has been firmly planted that this worldwide crisis was our own home-grown affair.
    Which makes the Labour Government omnipotent. And able to create mortgage loan crises in far-off Florida, and banking melt downs on Wall St and in Athens, Paris and Amsterdam.
    The only person who’s admitted responsibility is Alan Greenspan (he then was Chair of US central bank) who had published his findings in 2004. No-one denied his analysis then, so we’re all to blame.
    Including every British politician and commentators of every stripe who failed to tell us that Greenspan’s analysis was both wrong and disastrous! Mea Culpa.
    So I’m warning now. Cutting money supply and spending in an economic slowdown is both wrong policy and disastrous!

  8. sue_m says:

    I watched the report on the engineering firm in Lincolnshire that the banks had pulled the plug on and putting the staff out of work. Isn’t this exactly the type of firm that Osborne claimed his policies will help? FAIL!

    I hope George was watching because maybe even he could manage to see that continually subsidising banks whilst allowing them to dictate how they will operate and how much of taxpayers money they will dish out in undeserved bonuses is neither helping business nor doing the economy any good. What’s the saying – if you keep repeating the same mistake, you’ll keep getting the same result.

    After 2 years of their policies not working and doing massive damage to the SME businesses that are the backbone of the UK the fact that the Tories will still not adjust their course leads me to just one conclusion. They are not interested in the slightest in fixing either the UK economy or the resulting social issues. No, as long as the political clique and those whose elevated social circles they like to share continue to get richer nothing else matters to them. This view is only reinforced by what is coming out regarding their relationships with the Murdoch empire.

  9. Andrew Curry says:

    “The only thing we have to fear is fear itself” it’s become a cliche but it was true during thd great depression and it’s true now.

    Economic confidence is at an all time low st the moment, because everyone is fearing the worst, another recession, euro collapse.

    The Fear of the actual Euro collapse is bigger than the risk of it actually happening, and the debt problems have been dragged out for so long they are bring priced into investment decisions now.

    I’m glad the figures show a mild recession. It means the constant fear of recession will be out if the way and we can start the recovery when the lack of confidence subsides.

    1. Charles Jurcich says:

      Sadly it is not just down to confidence, though that is a factor. Peoples’ incomes are being squeezed, and sadly, no matter how much confidence they might have, you cannot spend confidence in the shops.

  10. Citizen Smith says:

    Deck chairs on the Titanic!

    As i posted in early Jan….
    – 3m unemployed by end of year
    – a number of countries will go down and out of the Euro
    – Recession leading to depression
    – Milliband will be not be Leader.

    Any leader of any substance should now be able to nail the ‘Condem’ party leaders for screwing up. However, any labour approach no doubt would be a ‘Balls up’ so its a ‘no-win’ situation. To be honest we are all doomed! Milliband does not come across as the man to do it and he looks and sounds a bit of a softy…. needs some aggression.

    My money on a future leader (maybe a bit too early now but..) is Chuka Umunna. In the meantime there is no-one else aprt from his brother… i wouldnt have any other Shadow Cabinet ‘same old’ ‘ same old’… but maybe we could fast track Chuka.


    1. Charles Jurcich says:

      Citizen Smith,
      Although Chuka Umunna is clearly intelligent, he is never-the-less a microeconomist, not a macroeconomist. Further, he is still trying to focus on politics rather than on macroeconomics.

      If he can frame the argument that Labour have never managed to do (- i.e. that government cannot run-out of money and should run a deficit without a corresponding debt issuance) then he will deserve promotion.

      In other words he has to embrace modern monetary theory, and stop worrying about politics.

  11. Andrew Dundas says:

    Faisal, it’s worth re-reading Paul Krugman’s article of 21st Oct 2010. It’s entitled: ‘British Fashion Victims’ and was published in the New York Times.
    He warned us that our governments were repeating the fatal mistakes of 1930s US and Europe by using austerity policies to ‘win confidence’. Those policies created the great depression that didn’t end until austerity policies were radically changed in the opposing direction.
    Some argue that those ‘austerity’ policies contributed to extremism and then war.

    So it is with Lord Snooty and ‘Markozy’. Until those three are gone, we shall all stagnant and decline. Hopefully we shall avoid conflicts too.

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