UK faces stagnation but may escape recession

UK faces stagnation but may escape recession

Britain’s economy stagnated in the final quarter of 2011 and is “very likely” to contract in the first half of 2012 according to the British Chambers of Commerce (BCC).

The euro zone debt crisis caused the economy to stagnate in 2011 and it has failed to improve this year, with the survey suggesting that one or two quarters of negative growth are possible.

A recession is usually defined as a decline in GDP for two or more consecutive quarters, a situation which the BCC believes can be avoided if the Government takes action.

The squeeze on household incomes from the Government’s austerity measures, high unemployment and rising prices have caused consumers to curb their spending.

In this environment retailers are struggling to boost sales and the housing market is floundering.

Although retailers such as Marks & Spencer managed to increase sales in the Christmas trading period, this was only achieved through heavy discounting, which still failed to boost the sales of higher-priced items such as household goods.

BCC director general John Longworth urged the Government to quickly implement the measures outlined by the Chancellor in the Autumn Statement.

He said: “Measures to improve the flow of credit to businesses, reforms of our complex planning system, and investment in infrastructure projects are all needed now”.

A recent poll by Ipsos MORI suggests that most business leaders believe the eurozone crisis will cause the UK economic climate to worsen this year.

The ‘captains of industry’ survey found that found that fewer than 10 per cent of 100 company bosses questioned expected the economy to improve.

However, 84% support the current Government and said that they expect its policies to improve the British economy in the long-term.

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