Job losses and debt may loom as economy estimate shows shrinkage

New evidence suggesting Britain may be heading towards recession has been published by the National Institute for Economic and Social Research (NIESR).

It has estimated that gross domestic product fell by 0.2 per cent in the three months to January 2012 – the same level as the official estimate of decline for the final quarter of 2011.

Should the estimate be correct and if February and March are also poor months for output, it could see the two successive quarters of falling gross domestic product needed to confirm a recession being recorded.

NIESR did issue a note of caution, stating: "These estimates should not be interpreted as confirmation of a technical recession in the UK. These estimates do suggest that output has been flat since October 2011."

However, even a low-growth situation could lead to some losing jobs as certain parts of the economy shrink while others grow, potentially leaving those who owe money and seeing their salaries vanish needing debt help.

The NIESR outlook is more negative than the view of Royal London Asset Management economist Ian Kernohan, who said this month's Markit/CIPS Purchasing Managers' Index data makes it appear "unlikely" that the UK is re-entering recession.

By Joe White