Press Articles

Evening Standard

 

GDP shock triggers new fears for economic recovery.

23.04.10

By Hugo Duncan
 
Business leaders today warned of a slow and painful "L-shaped" recovery in the UK after the economic resurgence stalled.

Official figures showed gross domestic product expanded by just 0.2% in the first quarter of 2010 -- half the 0.4% increase seen in the final three months of last year and far weaker than expected in the City, heightening concerns that Britain faces a long hard slog out of the worst recession since the Second World War. Graeme Leach, Chief Economist at the Institute of Directors, said: "The recovery will look much more L-shaped than V-shaped."

The services sector grew by just 0.2% in the first quarter, down from 0.5% at the end of last year.

Other surveys have been far more positive in recent weeks and economists said there was a good chance the figure will be revised up in the coming months.

Any revisions, however, will come after the General Election on May 6 when voters must decide whom to trust to restore the economy to health.

Duncan Higgins, senior analyst at Caxton FX, said: "There may be revisions, but it is clear that Britain's recovery is still set to be protracted, significantly lagging other economies in the G7 nations."

ING economist James Knightley said he continued to expect growth of 1% this year and 1.5% in both 2011 and 2012 - well below Treasury forecasts of 1.25%, 3.25% and 3.5% respectively.

He said: "We remain cautious on the UK recovery story. Confidence is falling, real wage growth is negative and with fiscal consolidation set to kick in over coming quarters, the household savings ratio will have to fall sharply in order for the household sector to generate any growth in spending."

.