Eurozone turmoil deepens but UK dodges double-dip
BRITAIN has dodged a doubledip recession but the crisis in the eurozone is deepening with unemployment at a record high, according to the latest figures. The UK economy grew by 0.3 per cent in the first three months of the year, having shrunk by the same amount at the end of 2011, the British Chambers of Commerce said.
The return to growth – which means Britain has avoided a new recession, defined as two consecutive quarters of decline – came as factory output rose in March at its fastest pace for ten months.
But the BCC business lobby group said the recovery was still ‘much too slow’ and called for ‘forceful’ measures to kickstart the economy.
It comes after the respected Organisation for Economic Cooperation and Development last week declared Britain was back in recession.
‘The UK economy is still facing huge challenges and the recovery is much too slow,’ said BCC director general John Longworth.
‘The UK has the potential to recover but to achieve that the Government has to set businesses free to grow.’
The BCC’S quarterly economic survey, published today, predicts growth of just 0.6 per cent in Britain this year – compared to the 0.8 per cent expected by the Treasury.
It warned that high oil and food prices are hitting family budgets and added that ‘the unresolved problems in the eurozone may trigger new upheavals later this year’.
Eurostat, the official statistics agency in Brussels, said unemployment in the 17 countries that adopted the euro had hit its highest level since the currency was launched in 1999.
The jobless rate rose to 10.8 per cent in February, from 10.7 per cent the previous month, with 17.1million people out of work, nearly 1.5million more than a year ago. Unemployment is 8.4 per cent in Britain. In Spain, more than half of young Spaniards who want a job cannot find work, with the youth unemployment rate now hitting 50.5 per cent.
It reinforced concerns that the debt-riddled eurozone is back in recession after gross domestic product fell 0.3 per cent in the final three months of 2011.
Separate figures show a bigger-than-expected manufactur
‘Potential to recover’
ing downturn in the eurozone. Economic research group Markit said its main index of factory output – where anything below 50 represents contraction – fell to a three-month low of 47.7 in March.
The slump in the troubled periphery spread to Germany and France, the region’s powerhouse economies, according to the report. Howard Archer, chief European and UK economist at think-tank IHS Global Insight, said: ‘ It looks odds- on that eurozone GDP contracted again in the first quarter of 2012.
‘And the prospects for the second quarter of 2012 currently hardly look rosy.’
But hopes are rising that Britain has avoided recession, despite last week’s gloomy report by the OECD.
Markit said its index of factory output for the UK rose to a 10- month high of 52.1 in March, as strong exports to Africa, south- east Asia and Japan offset weak demand in Europe.
Lee Hopley, chief economist at the manufacturing organisation EEF, said: ‘Despite further evidence of weakness in eurozone markets, UK manufacturers are looking beyond this and securing orders growth in non- traditional emerging markets.’ The BCC urged ministers to take ‘radical’ steps to bolster growth, including a new war on red tape and creating a statebacked bank to boost lending to small businesses.
‘The results of the quarterly economic survey point to a welcome but modest improvement in the economic situation,’ said BCC chief economist David Kern.
‘The UK economy will likely avoid a recession. However, growth is likely to remain low for some time, and a return to a more normal pace is unlikely until 2013.
‘Every effort must be made to boost growth and empower the private sector to create jobs.’
Labour shadow Treasury minister Owen Smith MP said: ‘After flatlining since George Osborne’s spending review in 2010, our economy should be doing more than just recovering the output lost at the end of last year.’