Recession fears grow as economy grinds to halt, ending 16 years of growth

By Daily Mail Reporter
Last updated at 12:08 PM on 22nd August 2008

Economy did not grow at all between April and June
Slump ends longest spate of growth for more than a century
Household spending fell 0.1% - weakest data in 3 years
Half of world's economies 'now in recession or on brink'
Halifax to close 53 estate agent branches, axing 100 jobs

Britain is braced for a possible recession after the economy ground to a halt between April and June, ending the longest stretch of growth for more than a century.

Growth in the second quarter of the year was unchanged from the first three months, producing the worst level of economic expansion for 16 years.

The Office for National Statistics were forced to revise an earlier estimate of 0.2 per cent growth in the gross domestic product for the quarter.

It ends a run of 63 consecutive quarters of expansion in the UK and is the weakest data since 1992.

Recession fears: The economy slowed to a standstill between April and June

The gloomy ONS figures shatter Government boasts of continuous economic growth since it came to power in 1997 and will place enormous pressure on Gordon Brown.

Their release came as it emerged financial experts believe half the world's economies are now in recession or on the brink.

Halifax also announced today that it was closing 53 estate agent branches because of the collapse in the housing market, which will mean the loss of up to 100 jobs.

The gloomy ONS data comes a week after Bank of England Governor Mervyn King said said there was 'bound to be a quarter or two' of negative growth as rate-setters battle the twin threats of an economic slowdown and rampant inflation.

They also showed the impact of the squeeze on households coping with soaring energy and food bills.

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Household spending declined by 0.1 per cent - the weakest performance in three years.

The ONS lowered its previous estimate after revising manufacturing and construction output downwards.

Growth in the powerhouse services sector - accounting for around three-quarters of economic output - was scaled back from 0.4 per cent to just 0.2 per cent.

The figures heighten the chances of interest rate cuts from the Bank's Monetary Policy Committee.

It has so far been reluctant to ease policy with the cost of living soaring towards five per cent - almost double official targets.

Experts - who had predicted revised growth of 0.1 per cent in the second quarter - were now warning of a 'very strong chance' of the UK slipping into recession.

Capital Economics' Jonathan Loynes said: 'The second estimate clearly increases the - already strong - chances that the economy will fall into recession over the coming quarters... Things will be considerably worse in 2009.'

Impact: A busy road in bustling Shanghai - if China's economy is hit by the economic slump it could spell financial disaster for millions

The Treasury moved to reassure the public they are doing everything they can to ease their financial problems.

A Treasury spokesman : 'The UK, like other economies, is seeing the consequences of globally high commodity prices, as well as the uncertainty in the credit markets.

'The Government's priority is to guide Britain through these challenging times, while also supporting those hit hardest as a result of these global factors.'

Leading investment bank Goldman Sachs yesterday painted an alarming picture of the global economy.

It said the U.S., Japan, the Eurozone and the UK are 'either in recession or face significant recession in the months ahead.'

Coming from a leading financial commentator, the remarks will strike a blow to governments trying to hold back the tide.

International economist Binit Patel warned that any slump would have a devastating effect on powerhouse China, which has been propping up many economies with its demand for raw materials.

Goldman Sachs warned: 'Given its importance to world growth in recent years, a world recession would in all likelihood involve a hard landing in China.'

This in turn could bring down the other half of the global economy and spell financial disaster for billions.

There is up to a 20 per cent chance that the global economy will fall into a recession.

The U.S. has been staring into the abyss of a major downturn and a series of interest rate cuts has failed to kickstart its economy.

France and Germany saw their economies shrink in the second quarter of this year, along with Japan.

The UK economy is holding up in the face of bleak predictions - the latest from the Office for National Statistics, which says business investment has fallen for the second quarter of 2008.

On Friday The ONS is expected to shave back its reading for second-quarter economic growth to 0.1 per cent from 0.2 previously estimated, according to analysts.

That would be the slowest pace since the early 1990s.

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Comments (11)

Here's what readers have had to say so far. Why not add your thoughts below?

This reccession is the out come of greed by the banks ripping off the poor!

- colin, london/England, 22/8/2008 11:43

The UK will enter a period of stagflation, it is not a question of if just a matter of time...
Now the real challenges will start for Mr Brown and for all of us. Do we want Labour to be at the helm to steer us out of trouble? Can Labour deliver?
Time is not for half hearted mesaures, if the UK wants to keep its head out of the water we need a strong program of economic and fiscal reforms. Something like a New Deal: based on roads, power station, railways project contructions to keep people employed whilst lowering taxes.

- Mike, Swindon, 22/8/2008 10:58

Whatever the technical definition of 'recession' may be, we who live in the real world of Brown's Britain know that we are already in recession.
The thing that angers many of us much more than hard reality, is the constant deceitful rubbish about how this so-called Government being best placed to ride the storm!
Regardless of global credit crunch, it was Brown's deliberate, misconceived social engineering & wasteful spending that made matters worse for us.
Anybody can spend 11years overspending, overtaxing & wasting money. You have to have a wider view than Brown's personal vendattas against private pensions, motorists & silly carbon taxes to manage a country's economy. Even now there are still those who think he beat 'boom & bust' & are still searching for his hidden leadership qualities!

- R P F, Frodsham, cheshire, 22/8/2008 10:52

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