LONDON — Britain’s National Statistics Office is due to release figures Friday that will reveal whether Britain did in fact emerge from recession at the end of last year, as previously reported.
Economists have in recent days reconsidered their expectations that a 0.1 per cent rise in gross domestic product in the fourth quarter would be revised upward in new data due out Friday — with some warning of a downward revision instead.
The perilous state of the British economy is expected to be a major issue in an upcoming general election and news that the country has not yet escaped the downturn would be a blow to British Prime Minister Gordon Brown’s Labour Party in what is expected to be a closely fought campaign.
The rise in GDP in the last quarter of 2009 had officially ended an 18-month downturn, the country’s worst recession since the Second World War.
It was an early estimate on how the economy fared over the quarter, based on around 40 per cent of the data that will eventually form the third and final revision of the figure. Friday’s estimate is the second report from the Office for National Statistics — the third update is due at the end of next month.
Economists had anticipated a small upward revision on Friday, but that expectation was knocked on Thursday by figures showing a 5.8 per cent drop in business investment in the same quarter.
“The substantial fall in business investment is a horrible surprise and extremely disappointing,” said IHS Global Insight economist Howard Archer. “It dilutes hopes of an upward revision on Friday . . . and even raises the spectre that this minimal growth could be revised away.”
Britain was already the last major economy to return to growth after the global credit squeeze. It was hit particularly hard because of its huge banking and financial-services sector centred in London, which had to be propped up by the government’s multibillion-pound bailout of major banks, and higher levels of personal debt among consumers. Like the U.S., it also faced a collapsed real estate bubble.
The fallout cost the country 100 billion pounds (C$162 billion) in lost output as GDP shrank 5.9 per cent from peak to trough. Some 1.3 million people were laid off, unemployment rose as high as 7.9 per cent and around 50,000 families had their homes repossessed.
The European Commission has lowered its forecast for UK economic growth this year to 0.6 per cent, from the 0.8 per cent it predicted in November. The Commission kept its broader growth forecast for the 27-country European Union at 0.7 per cent.
The Commission’s projections are far lower than the British government’s own forecasts for growth this year of one-1.5 per cent and further growth of 3.5 per cent in each of 2011 and 2012. They also provide a sharp contrast between European growth and International Monetary Fund forecasts of world economic growth of four per cent and U.S. growth of 2.7 per cent.