Britain ‘set for return to recession’

Britain is returning to recession, according to a prediction by the Organisation for Economic Co-operation and Development (OECD).

The body has published its projections for the group of seven leading industrialised nations and forecasts the UK will see an annualised contraction in gross domestic product (GDP) of 0.4 per cent – effectively a 0.1 per cent fall.

If this turns out to be true, then following the negative growth in the last quarter of 2011 Britain would be back in recession due to having seen successive quarters of economic shrinkage.

If this turns out to be correct, many more people could find they face debt problems due to companies losing confidence and not investing, with jobs being shed as a result.

One brighter note is that the OECD does not predict a protracted downturn, suggesting the UK will see annualised growth of 0.5 per cent in the third quarter.

The OECD view differs from that of the Office for Budget Responsibility (OBR), which has predicted the first quarter will see a return to growth, with the caveat that "another fall cannot be ruled out given the volatility of quarterly output estimates".

Overall, the OBR anticipates a 0.8 per cent increase in GDP for the year as a whole, which would represent weak growth and would not help create many jobs, meaning those who are struggling to pay back what they owe while suffering the loss of income may struggle to find work.

Indeed, the OBR has predicted that the next year will see the UK unemployment rate rise form its present 8.4 per cent to 8.7 per cent.

Earlier this week, the Office for National Statistics released its third estimate for GDP in the final quarter of 2011 and revised the output downwards from a shrinkage of 0.2 per cent to one of 0.3 per cent.

Posted by Paul Thacker