UK is back in recession, says OECD

By Emma Rowley
10:57AM BST 29 Mar 2012

http://www.telegraph.co.uk/finance/economics/9173199/UK-is-back-in-recession-says-OECD.html

Britain has plunged back into a recession, as the economy continued to shrink in the first three months of the year, according to a leading global authority.

In a major blow for the Chancellor, the Organisation for Economic Co-operation and Development (OECD) has calculated that the UK economy shrank in the first three months of the year.

Over the January to March period, economic output fell compared to the previous quarter, at an annual rate of -0.4pc, the Paris-based think-tank believes. That would imply quarter-on-quarter growth of -0.1pc.

After three months of negative growth at the end of last year, that figure would signal that the UK has double-dipped back into a recession.

The analysis, contained within the OECD's interim economic assessment, will pile pressure on George Osborne after official figures on Wednesday slashed the UK economy's growth profile over 2011.

The economy shrank by a bigger-than-thought 0.3pc in the last quarter of the year, the Office for National Statistics reported. That meant growth was just 0.7pc for the year as a whole.

The expectation among economists had generally been that despite the end of year slump, the UK would avoid a recession as the economy grew in the first three months of 2011.

However Wednesday’s revisions to the fourth quarter numbers stoked fears that the UK failed to recover in the following quarter, which will be further fanned by the OECD’s figures.

Analysts at Royal Bank of Scotland said on Thursday that the surveys and numbers released so far likewise indicate that the UK economy shrank 0.1pc in the first quarter, driven by a "huge decline in construction output".

"Whilst the underlying position looks more reassuring ... the risks of a flat or negative headline outturn in Q1 may well disappoint market expectations," said Ross Walker, an economist at the bank.

World growth has slowed, the OECD said in its broader assessment, with US and Europe now on separate growth tracks.

“Our forecast for the first half of 2012 points to robust growth in the United States and Canada, but much weaker activity in Europe, where the outlook remains fragile,” said Pier Carlo Padoan, the organisation's chief economist. “We may have stepped back from the edge of the cliff, but there’s still no room for complacency.”