OECD says UK falling back into recession
The UK economy is expected to contract by 0.4 per cent on an annualised basis in the first three months of 2012, according to the Organisation for Economic Co-operation and Development (OECD).
This represents a contraction of 0.1 per cent compared with the final quarter of 2011 and means that the UK is returning to recession.
UK output declined at an annual rate of 1.2 per cent in the final quarter of 2011, according to the OECD, a Paris-based think tank which promotes policies that improve people’s economic and social well-being.
The organisation expects the UK to be the second slowest economy to recover in the first half of 2012, with only Italy taking longer to return to growth.
In contrast Germany and France will grow at a significantly faster pace than the UK in the 2012 first half, but their growth will slow down as the year ends.
Figures from the Office for National Statistics were also pessimistic, showing UK output falling by 0.3 per cent in the final quarter of 2011, rather than 0.2 per cent as previously estimated.
Shadow chancellor Ed Balls is urging the government to slow down its programme of spending cuts and tax increases, action which the OECD suggested in 2011 in order to combat slower than expected growth.
The OECD has also highlighted an increasing gap between European and North American economies and is calling on policy makers to continue their efforts to sustain recovery.
Pier Carlo Padoan, the OECD’s chief economist, said: “Substantial risks remain in the euro area
“Confidence is low, [bond] yields remain high and lending activity has weakened recently.
“So in spite of positive action [from the European Central Bank], more needs to be done to boost growth and sustain the recovery.”