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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.
Hotels and restaurants suffered from the cold snap in January, with output tumbling by 0.7% in the first three months of the year having increased by 1.9% in the previous quarter.
The City continued to recover, however, with business and finance growing by 0.6% as banks, stockbrokers and other firms in the Square Mile and Canary Wharf rebuilt profits. Factory output also rose by 0.7% but agricultural production fell 1.1% and the construction sector declined by 0.7%.
Alan Tomlinson, a partner at insolvency firm Tomlinsons, said: “This shows just how anaemic the UK economy still is. It's further proof that all is still not well with UK business.
“From what we're seeing on the ground, the return to a strong economy will take a lot longer than some think, potentially a number of years. In technical terms, the recession may be over, just, but in real terms businesses remain under significant pressure.”
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.”
Reader views (4)
- Gilbert, London, 23/04/2010 11:23 - you ar correct, but we haven't had the huge spending cuts yet. They are due very soon.
- Dave, London, 25/04/2010 17:46
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- ALAN,, ENGLAND., 23/04/2010 11:18 - don't you know how to change to lowercase. You numpty.
- Dave, London, 25/04/2010 17:42
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I run a small business and can vouch for the fact that the weather caused a downturn in my business, the snow and more recently the rain simply stopped many people from shopping.
That said the last few weeks have been significantly better and people seem to have a more optimistic mood because the economy has stabilised.
- Gilbert, London, 23/04/2010 11:23
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THIS IS THE REAL NEWS AFTER LAST NIGHTS POINTLESS DEBATE. AS CLINTON SAID ITS THE ECONOMY STUPID. INFLATION IS UP, SO INTEREST RATES ARE ABOUT TO ROCKET. UNEMPLOYMENT IS UP TO TEN MILLION, SORRY ECONOMICALLY INACTIVE. UNLESS SOMEONE DOES SOMETHING TO CUT OUR VAST DEBTS UNEMPLOYMENT WILL CONTINUE TO RISE. SO IT APPEARS CAMERON IS RIGHT ALONG WITH PRACTICALLY EVRY HEAD OF THE MAJORITY OF BRITISH FIRMS. YET ALL THE SPIN DOCTORS TALK ABOUT IS BODY LANGUAGE. MY BODY LANGUAGE IS TO HOLD MY HANDS OVER MY EARS AS I LISTEN TO HOPELESS ARGUMENTS ON TELEVISION. WELCME TO THE PHONEY ARGUMENTS OF CLEGG AND BROWN, ONCE AGAIN ITS THE ECONOMY, STUPID.
- ALAN,, ENGLAND., 23/04/2010 11:18
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