Page last updated at 16:58 GMT, Friday, 23 October 2009 17:58 UK

Labour recession hopes 'a myth'

Economy figures 'deeply disappointing'

Labour's plan to pull the country out of recession is in tatters after figures showed the economy was still shrinking, the Conservatives have said.

Shadow chancellor George Osborne said the UK was in the deepest recession since 1945 after the economy shrank 0.4% between July and September.

It had "destroyed the myth" that ministers had a recovery plan, he said.

Chancellor Alistair Darling said he was "cautious" about the recovery but was "certain" confidence was improving.

He said the economy was "not out of the woods yet" but he believed that confidence was beginning to return in many areas.

'Deeply concerning'

Friday's figures mean that the economy has now contracted in sixth successive quarters, making it the longest recession the UK has endured since records began in the 1950s.

Analysts had been expecting the economy to record growth of about 0.2%, which would have meant the recession was technically at an end.

They [government] haven't been pushing the banks as they should have been
Vince Cable
Lib Dem Treasury spokesman

Mr Osborne said it was "deeply concerning" that the UK economy was still in recession while countries like France and Germany had come out of it six months ago.

"It destroys the myth that Britain was better prepared and destroys the myth the government had a recovery plan," he told the BBC.

"We need a change in direction to get the country working again."

Mr Darling said he had never forecast a return to growth at this stage, but he believed growth could return at "the turn of the year".

However, he said, he was "certain" that "confidence was beginning to return" and that it would be "utter madness" to withdraw support for the economy and jobs right now.

"Growth will come, I am confident about that. I am confident that business will begin to see a difference, but it will take time."

Loan obstacles

Business Secretary Lord Mandelson said it was the media, not ministers, who had been building up the prospect of a return to growth at this stage.

The UK was "going from a period" of fighting the recession to building confidence in the economy, he added, and it would be a "mistake" to withdraw investment while this was happening.

Economic confidence is returning, says Darling

For the Lib Dems, Treasury spokesman Vince Cable said the failure of banks to lend credit to companies was proving an obstacle to recovery.

"As far as I can see, they haven't been pushing the banks as they should have been to make sure that credit goes out to... solvent borrowers" he told the BBC.

"There are very large numbers of companies with good profit history, good credit history, order books, which cannot get credit in order to keep their businesses going and to expand, and that's the key weakness at the moment."

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