UK back in recession

Britons may be shocked to learn that the country is back in recession.

Although such an event had been predicted by the Organisation for Economic Co-operation and Development, most commentators had expected gross domestic product to rise slightly in the first three months of the year.

Instead, the initial estimate of the Office for National Statistics (ONS) is that the opening quarter of 2012 saw a 0.2 per cent decline in output.

While the service sector grew by 0.1 per cent, the output of production industries declined by 0.4 per cent and construction fell by three per cent.

It is the fourth quarter out of the last six in which the economy has contracted and puts the chained volume measure at 98.1 per cent of the 2008 peak of activity.

Although this is the initial estimate and the figures may be revised upwards, it is also possible the economic contraction may turn out to be worse.

This was the case in the final quarter of 2011 when the ONS revised the contraction up from 0.2 per cent to 0.3 per cent.

What this may mean for those struggling with debt is that the prospects of their fortunes improving soon will have taken a blow.

A recession means it is likely that unemployment will rise, meaning some people who might be able to cope with their repayments now will find it harder to meet them in the future, while it also reduces the chance of workers being able to get better paid jobs to help pay the bills.

Those struggling to meet their repayments each month may find a debt management plan helps make this easier.

News of the return to recession has, however, come despite some apparently positive economic data in recent weeks.

These included ONS figures showing the value of retail sales rose 5.7 per cent year-on-year in the 12 months to March, while the volume was up 3.3 per cent.

And the three months to February saw unemployment fall by 35,000 – the first quarterly drop since May 2011 – and 53,000 more people in employment.

By James Francis