Shock figures showing that Britain is still struggling through recession sent the pound plunging and threw fresh doubt over Alistair Darling’s plans to cut the national debt.
The City and Downing Street were stunned as output data revealed that the economy shrank by 0.4 per cent between July and September — an unprecedented sixth consecutive quarter of decline.
The figures dashed predictions that Britain was emerging from recession and dealt a blow to Gordon Brown’s hopes of an economic recovery taking root before the election. The pound, which had been trading at €1.111 and $1.6693, collapsed against the currencies to €1.087 and $1.6323.
Economists had predicted that output was growing by 0.2 per cent.
Chris Williamson, chief economist at Markit, which conducts surveys on the state of the economy, said that yesterday’s figures were wrong and could lead to “disastrous policy mistakes”.
Output has dropped 5.9 per cent since the recession began in the second quarter of last year. In the 1980s output fell by 6 per cent.
The lingering slump comes despite record low interest rates, extra government spending and a £175 billion boost to the money supply through quantitative easing. Last month, Mr Brown had said that Britain was coming out of recession. He told the BBC: “I think you will see figures pretty soon that show the action that Britain has taken yielding effect.”
Retailers used yesterday’s data to call on the Chancellor to keep VAT at 15 per cent to boost the January sales.
The Treasury insisted that the VAT rate would be restored to 17.5 per cent on January 1 as planned. But pressure is likely to intensify over the weeks running up to the Pre-Budget Report.Richard Lambert, the Director-General of the CBI, said that changing the rate of VAT at midnight on December 31 would create practical problems for businesses and that the current rate should be extended.
Sir Stuart Rose, executive chairman of Marks & Spencer, told The Times: “If the Government could delay for one week or two that would make an enormous difference. We have made pleas to the Government already but it doesn’t seem to have made any difference.”
In an interview this week Sir Philip Green, who owns Topshop, said that it was inevitable that VAT would have to rise because of the state of the public finances. “But to do it on January 1 is a ludicrous time. Let’s just be sensible,” he said.
Bonus 1: The video
Bonus 2: The comments - Pay your attention please.
1. David Chambers wrote: I actually think the figures are even worse that reported.
Why do I say that, well based on my experience of moving my business to the Philippines in 2005 the average pound peso rate was between 90 to 100 peso to pound then.
Earlier this year it fell to as low as 63 peso to pound and even today is only 76.
I do all my business from here now selling to UK.
Considering that the peso is in no way a currency that can affect any world markets and the fact that even here in the Philippines growth has slowed considerably, though not in recession, the relative profits I make now despite making substantial price cuts in the services my company offers, effectively boosting my business at the expense of local UK based competitors, is surging every month. I am so busy now and so profitable and it just gets better , and the correlation in the downward state of the UK economy is almost a perfect match. In the last 3 months 5 former UK companies have moved here in the same business complex and all are doing extremely well selling their services back to UK in a low cost low or no tax environment.
Small businesses like these made up a huge part of the economy but they are very flexible and if they cant cope in the environment back in UK they will just keep on coming to places like this.
And we pay zero Uk taxes now.
I wouldnt leave brown and darling in charge of a whelk stall for 15 minutes on a stormy february night on a beach at bognor because they would bankrupt me. And these clowns pretend to know how to run an economy
2. A Williams wrote: “The City and Downing Street were stunned as output data revealed that the economy shrank by 0.4 per cent”
Who is promoting this drivel?
Why should “The City”,(by which is meant the investment banks, hedge funds, insurers et al) who was the prime mover in bringing down the world economy through the failure of their “exotic” investment strategies – creating sub-prime mortgages then bundling them to sell to each other using other people’s money, i.e. PYRAMID SELLING, be allowed to reinflate the very bubble that caused the problem in the first place USING TAXPAYERS MONEY DOLLED OUT TO THEM BY GOVERNMENTS UNWILLING TO LET THESE PERPETRATORS GO TO THE WALL?
As in the 1930’s, the “financiers” are quite happy to see destitution amongst the middle and working classes and will manipulate subservient governments to achieve their aims.
It was this scenario that gave credence to the Nazi’s then and will most certainly do the same again.
A horror awaits us.
3. Larry Haac wrote: It may come as a shock for people who sit in a cubicle, but for those of us who walk the high street, it’s obvious.
4. K R wrote: “Economists had predicted that output was growing” - like they predicted the bubble bursting in the first place?
Allow me to point to the correlation they really missed, that of an unprecedented 6th quarter fall coinciding with an unprecedented 12th year of socialist rule.
And don’t expect the chancellor to hold off the VAT rise. He needs the income to avoid mass redundancy in the civil service, losing all those paid-up votes in the process.
More at: http://business.timesonline.co.uk/tol/business/economics/article6888402.ece#
