Page last updated at 00:30 GMT, Wednesday, 27 January 2010

UK economy emerges from recession

Graph showing GDP growth

The UK economy has come out of recession, after figures showed it had grown by a weaker-than-expected 0.1% in the last three months of 2009.

The economy had previously contracted for six consecutive quarters - the longest period since quarterly figures were first recorded in 1955.

There have been recent recovery signs - last week, UK unemployment fell for the first time in 18 months.

The UK's had been the last major economy still in recession.

Europe's two biggest economies - Germany and France - came out of recession last summer. Japan and the US also emerged from recession last year.

The weak level of growth took its toll on the value of the pound, which fell against both the dollar and the euro on the money markets.

'Below expectations'

"We can say that Britain has just crossed the line in coming out of recession," said BBC chief economics correspondent Hugh Pym.

"It [the growth figure] was below analysts' expectations. The figure could be moved down, or indeed upwards."

How the ONS announced the UK had emerged from recession

Our correspondent said the move out of recession had been greatly boosted by the government car scrappage scheme.

Joe Grice, from the Office for National Statistics (ONS), said the UK's production and service sectors each grew by 0.1% during the quarter.

The ONS figures also showed that GDP fell by a record 4.8% in 2009.

"The Q4 GDP figures are a major blow to hopes that the UK economy had emerged decisively from recession in Q4," said analyst Jonathan Loynes at Capital Economics.

"No doubt some commentators will claim that the figures are under-estimating the true strength of the recovery and will be revised up in time.

"That is certainly possible. But it won't change the big picture of an economy still operating way below both its pre-recession and trend levels of output."

'Frail' recovery

The UK recession began in the April-to-June quarter of 2008, and was the longest UK recession on record.

During 18 months of recession, public borrowing increased to an estimated £178bn, while output slumped by 6%.

After the GDP figures were published, John Wright, chairman of the Federation of Small Businesses, said that the recovery remained "frail".

Even with some revision... we are still talking about an extremely lacklustre recovery
Stephanie Flanders, BBC economics editor

"In order to strengthen the recovery it is important that we boost consumer confidence and demand and that interest rates are held steady as continued investment in the economy will be the key to ensuring a sustainable recovery," he said.

Meanwhile, Lee Hopley, chief economist at manufacturers organisation EEF, said: "Whilst today's data confirm that manufacturing is now out of recession, they also continue to raise questions over the health of the wider economy.

"The trajectory for the recovery, particularly in the next six months, is an uncertain one and the best prospects remain an export-driven turnaround."

First estimates of how the economy has performed are made with about 40% of the data available, and Investec economist David Page has warned there is "plenty of room for surprises" in the figures.

But the BBC's Economics Editor Stephanie Flanders said: "Even with some revision - in fact, even if it turns out that the economy actually started to grow in the third quarter, given that the first estimate of a decline 0.4% has already been revised up to -0.2% - we are still talking about an extremely lacklustre recovery."

'Staggering'

Chancellor of the Exchequer Alistair Darling said he was now sure that "we are on a path to recovery.

"I'm confident but I'll always remain cautious".

But shadow chancellor George Osborne told the BBC that the UK needed a "new model of economic growth" under a Conservative Government.

He added: "Let's be clear - this is about as weak growth as you can get."

Liberal Democrat Treasury spokesman, Vince Cable said the markets would be surprised that growth had been markedly slower than expected.

"Far from the quick recovery the chancellor has been praying for, the economy is only just staggering back into growth," he said.



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