UK Economy Takes a Hit in Q4
Figures from the Office of National Statistics show that the UK economy suffered a contraction of 0.5% in the last three months of 2010. The figure for Q3 indicated growth of 0.7%
The ONS has blamed the snow in December for the negative impact on UK economic activity for the whole quarter but said that even had the figures hadn’t counted the affects of the weather, the Q4 figures would have been "flat".
Commentators on the figures have called the 0.5% drop in economic growth "unexpected" and even "shock"; the Chancellor, George Osborne, has called the news "disappointing".
Other responses have included calls that the coalition government has made swingeing cuts too deep and too fast with some economists hinting that this could spell the beginning of a double-dip recession.
Whatever the reason, further analysis of the figures show a particularly heavy fall in construction for the period with the mining industry not far behind. The hospitality, transport, finance and government secotrs all saw a contraction.
The sectors of the UK economy that did experience growth were agriculture, manufacturing and utilities. The British manufacturing sector saw the greatest growth at 1.4%
Commenting on the figures for Q4, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“The fall in Gross Domestic Product (GDP) in the fourth quarter is worrying and well below everybody’s expectations. Even if you accept the assessment from the Office of National Statistics (ONS) that underlying growth was flat before the impact of the severe weather, the outcome is very disappointing.”
“There are positive features in these figures, notably the strong growth in manufacturing. However the decline in services is of concern and could have an adverse effect on jobs.”
“In spite of these figures we believe the government should persevere with the deficit cutting programme, but the economy is clearly fragile and policy must be implemented cautiously. The Monetary Policy Committee (MPC) must abandon any early interest rate rise until the recovery is more secure. On its part, the government must ensure obstacles that hamper businesses in their efforts to create jobs, invest and export must be removed.”