Britain in short recession, growth expected later in 2012

A leading thinktank expects Britain to fall back into recession in the coming months, but it should not stay there for long. End Quote

(1888PressRelease) February 04, 2012 - Although it has yet to be confirmed - an official recession requires two consecutive quarters of negative economic growth - the National Institute of Economic and Social Research (NIESR) believes the UK is currently in a downturn.

With the final quarter of 2011 showing 0.2% negative growth and only a one in four chance of avoiding the same in the first three months of 2012, the NIESR is urging Chancellor George Osborne to water down his austerity plan.

Extra spending in infrastructure would also help the UK economy get back on track, according to Simon Kirby, an economist at the institute.

The overall NIESR outlook for 2012 predicts the return of positive growth in the second half of the year, but it will be modest. All in all, it is predicting a 0.1% contraction this year and an unemployment peak of 9.1%.

However, Mr Kirby stresses that this recession will go much deeper if the eurozone does not manage to resolve its debt crisis reasonably quickly.

"Assuming a successful resolution of the euro crisis, we expect growth to pick up in the second half of the year, and to accelerate somewhat in 2013," it said.

"Financial instability resulting from the euro crisis, combined with fiscal austerity measures, will take their toll on growth in Europe, and to a lesser extent in the US."

Both the Ernst & Young ITEM Club and the Centre for Economics and Business Research are expecting a mild recession that will see a return to positive growth in the second half of the year.

"It's not going to be a repeat of 2009 - we are not going to see a serious double dip," said Professor Peter Spencer, Chief Economic adviser to the Ernst & Young ITEM Club.

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