Britain faces entering 2012 in recession as growth figures continue to flatline, according to economic research published this week.
Figures for the last three months (Q4 or fourth quarter) are expected to show the economy contracting as manufacturing – which was supposed to drive recovery – struggles and the country’s services sector, which accounts for three-quarters of the economy, is said to be faltering.
Accountancy and consultancy firm BDO LLP, which incorporates several other economic forecasts into its own, said its Output Index, which measures the next quarter expectations, fell by a full point in October to 92.6 – the lowest since the 2009 recession. Growth is 95.0 or above.
The company said it would like to see the Government tackle Britain’s complicated and burdensome tax codes but also a greater focus on capital spending.
It also recorded that employers’ hiring expectations are at their lowest since before the general election.
The Confederation of British Industry said it had seen a sharp drop in export orders for British manufacturers while Lloyds Banking Group said its employment confidence index fell a further five points to minus 72, the lowest since 2009.
Meanwhile, the respected Ernst & Young ITEM Club urged the Bank of England to formally relax its inflation targets of 2 per cent. The Bank has singularly failed to meet its statutory targets more often than not with Governor Mervyn King regularly required to write a letter of explanation to the Chancellor of the Exchequer.
But with inflation expected to drop significantly next year as VAT, food prices and energy hikes work their way out of the indices, E&Y worried that the Bank might choke off any recovery by raising interest rates to curb what is largely imported inflation.
It suggested a modest increase in the acceptable range from 2 to 2.5 per cent might be considered or that the Bank finds a way to strip out food and energy prices – about which it can do nothing – and focus on the domestic economy including wages.
Meanwhile, E&Y also predicted that the global demand for oil and further tax rises means British motorists will be paying £100 to fill the average 70 litre tank by 2015 when the cost of a litre of unleaded is expected to be at least £1.54 compared to today’s £1.35. Chancellor George Osborne is expected to announce a 3p a litre increase in January followed by a further increase in August.
An analysis by PwC (formerly Price Waterhouse Coopers) showed that across the United Kingdom, 240,000 fewer people worked in the public sector in the second quarter of this year, compared with the same period a year before following large job losses in local government, central government, including defence and education sectors and in public corporations such as the BBC and the Post Office. Many more jobs have been lost in the public sector over the past year than have been created in the private sector.
Where there has been private sector job creation, this has focused on part-time rather than full-time posts, says PwC.
