Back in Recession

The UK has slid back into recession, making it the second time in four years. This means that it is the worst peace time recession in over a century, worse than the Wall Street Crash of 1929. After that the UK economy was shrinking for about three years, but recovered on the fourth and there was no double dip.

What caused the UK to go into growth was two successive quarters with negative growth. In the figures for the first three months of 2012 released yesterday it was revealed that the UK economy had shrunk by 0.2%, pushing us into recession. One of the major reasons for this shrink is the collapse in the construction sector in the first part of 2012 as well as fears of the Eurozone and the continued failure of the government’s economic policy. Yet there are no signs that the government plans on changing course for austerity, with some Conservative MPs calling for the cuts to go deeper and happen faster, they don’t seem to have got the point. When a policy is so clearly not working, it will not work by doing more of it. What’s even more worrying is that the majority of cuts are still to come which will drive up unemployment and possibly keep the UK in recession for the rest of the year. As I have written before, the policy of severe austerity is not working anywhere in Europe, shrinking or stagnating of economies is what is characteristic of Europe at the moment. The Dutch government has just fallen due to a disagreement in the ruling coalition over cuts, the Czech government could topple any day now and France is looking set to elect a socialist as president who will oppose the harsh cuts. What many on the left in Europe are looking at is the success of America, Obama has managed to recover the US economy to above its position before the crisis, while the UK is sitting 4% below the 2007 level.  Unemployment in the US is shrinking and confidence in the markets is growing, unfortunately centre-right politicians in Europe are ignoring both history and current events, they seem blind to the facts.

 The British government is looking increasingly incompetent, the budget was extremely unpopular, the economy is shrinking and they’re embroiled in a scandal with the Murdochs. What will happen next is anyone’s guess, I don’t believe that the UK government is close to collapse but if the current string of embarrassments continue it would be perfectly conceivable that the coalition could fall apart.

Regardless what will happen, yesterday’s news is extremely disappointing for the UK.