Weak industry, exports push UK towards another recession

Wednesday 27 March 2013 16.49
UK economy shrank by 0.3% in fourth quarter of 2012
UK economy shrank by 0.3% in fourth quarter of 2012

Sharp falls in industrial production and exports shrank Britain's overall output at the end of 2012, data confirmed today, pushing the economy to the brink of a "triple-dip" recession.

The Office for National Statistics said that gross domestic product dropped 0.3% on the quarter in the three months from October to December.

Compared with a year earlier, GDP grew 0.2%, slightly less than estimated earlier.

Separate fourth-quarter current account data showed that Britain's deficit with the rest of the world stood at £14.037 billion sterling, overshooting forecasts.

The UK's economic contraction compared with the previous quarter was spurred by a 2.1% decline in industrial production - the biggest fall since the first quarter of 2009 - and a 2% slump in exports.

Today's GDP figures showed that Britons' disposable income shrank 0.1% in real terms in the fourth quarter, but household spending help up, rising 0.4%. The household savings ratio fell to 6.7%.

If the economy shrinks again in 2013's first quarter, Britain will slip into its third recession since entering one in 2008, fuelled by the financial crisis.

News on the first quarter of 2013 has been mixed, with a sharp fall in manufacturing output in January but strong survey data on the dominant service sector in February. Analysts warn that the current spell of cold weather and snow could be enough to tip the fragile economy into recession.

The latest economic forecasts by the independent Office for Budget Responsibility, used by the government, showed last week that Britain will eke out meagre 0.6% growth this year - half that it predicted only a few months ago.