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Britain heads for full recession as services and industry feel crunch
Hugo Duncan1 Oct 2008
Britain today stood on the brink of full-blown recession as the economy showed signs of buckling under the global financial crisis.
Figures from the Office for National Statistics showed the services sector, which makes up more than three-quarters of the economy, failed to grow for the first time in six years in the three months to the end of July.
British manufacturers last month suffered their worst period since the early Nineties as output plummeted and factories slashed jobs.
City economists said the "dismal" news, along with the escalation of the banking crisis, meant Britain was heading for a nastier recession than feared.
Malcolm Barr, economist at JP Morgan Chase, said: "Our forecast had anticipated a 'recession-lite' experience for the UK. We are downgrading our forecast to show a deeper and prolonged period of weakness - a meaningful recession rather than just one in name."
But hopes were raised that the Bank of England could cut interest rates as early as this month. Mr Barr expected a cut from five per cent to 4.75 per cent on Thursday next week rather than in November. He forecast that rates would fall to 3.25 per cent next year, as opposed to his earlier forecast of four per cent.
A rate cut would bring relief to millions of households struggling with mortgage repayments. Inflationary pressures eased last month as the price of oil and other raw materials fell. Signs that inflation may be reaching its peak raised hopes that rates could be lowered. In the service sector, hotels, restaurants, pubs and clubs came under pressure as consumers cut back spending in the response to soaring prices and job insecurity. Experts said conditions in the sector will get worse, as it includes financial services firms such as stockbrokers and banks. The manufacturing sector suffered its worst month on record in September, according to the Chartered Institute of Purchasing and Supply. Output plunged along with new orders from home and abroad, and firms slashed jobs in a bid to cut costs. Cips' barometer of activity in the sector, where 50 is the cut-off between boom and bust, crashed from 45.9 in August to 41 last month - the weakest reading since records began 17 years ago.
Reader views (4)
Ignore all data coming from goverment funded offices.. the UK is already in a recession.. look around you.. you dont have to wait for stats that are 3 months behind the curve..
- Paul, manchester, 02/10/2008 01:23
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When will ES report the facts?? Interest rate cuts have not been passed on to customers. In fact bank rates offered to customers for loans have significantly increased as the BOE cut rates. Even banks cannot borrow at these rates. The market is dictating rates based on facts available and those rates are fare higher. If the UK really believes a rate cut is going to solve the problem, and many seem to do so, they are in for a very big shock. You should be dealing with the issue of unprecedented UK debt (personal, govt & corporate) and the lack of any real wealth. You can't borrow yourself to prosperity. Good Luck
- Kr, Cap Ferrat France, 01/10/2008 16:40
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If the Bilderbergers, Rothschilds, Rockerfellers, Buffets, Mellons, Chases, Gates, and other SUPER RICH would fund this mess that they created, such as the WALL STREET BAILOUT, And If The People Of The World Would DISMANTLE The ILLUMINATI, things would be better for everyone in the world.
The U.S. DID NOT CREATE THIS GLOBAL CATASTROPHE!
THE SUPER RICH IN THE ILLUMINATI DID, FOR THEIR OWN EVIL PURPOSES! It's part of their plan to bring about WW III and the END OF TIME!
- John, UNITED STATES, 01/10/2008 16:26
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I look forward to the interest rate cut - it will mean I can pay off my negative equity faster. Happy times.
- Dan, East London, 01/10/2008 15:43
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