Britain likely to miss recession, but growth is slow say analysts

Tim Wallace
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BRITAIN seems likely to have avoided a return to recession in the first quarter of 2012, with economists predicting very slow economic growth to be revealed by official statisticians on Wednesday.

The economy shrank 0.3 per cent in the final three months of 2011, and a second negative quarter would push the UK into a technical recession.

Although the result is very uncertain, relatively healthy business surveys and falling unemployment point to a gradual expansion in the quarter.

However, collapsing construction output has acted as a drag on the economy and Eurozone economies such as Spain are in recession, highlighting the risks posed to the growth outlook.

The Centre for Economics and Business Research (CEBR) today upgraded its growth forecast for the year to 0.3 per cent from a 0.4 per cent contraction.

However, its medium term forecast is for growth of just over one per cent per year through to 2016, largely hit by sustained high inflation, and that low growth will have a range of negative effects, such as pushing unemployment up to three million for several years and preventing the state from achieving a balanced budget in 2016-17.

Analysts from Daiwa pointed to the 1.8 per cent jump in retail sales in March as evidence that consumer spending is strong – though “the latest figures were boosted in part by panic-buying of fuel” – which it expects will leave GDP growth at 0.1 per cent.

Looking to the second quarter, Bank of England governor Mervyn King warned factors such as the Jubilee bank holiday risk dragging down growth and possibly causing another quarterly contraction.

Indeed, the bank predicts a “zig zag” growth pattern for much of the year.