The end of the UK’s longest-ever recession has been confirmed when official figures were published.
Experts predict the beleaguered economy grew by 0.4% between October and December, ending a record six straight quarters of contraction.
During 18 months of recession brought on by the credit crunch and then financial crisis, public borrowing has ballooned to an estimated £178 billion while output has slumped 6%.
This far exceeds the recession of the early 1990s and is the worst slump since Conservative Prime Minister Margaret Thatcher took office 30 years ago.
The data should reflect a slow recovery among services firms – accounting for more than two-thirds of the economy – as signalled by recent surveys. Manufacturers are also likely to have seen tentative growth, helped by the Government’s cash-for-bangers scrappage scheme, despite disappointing retail sales figures for December last week.
Official confirmation of recovery will mean that the UK is the last of the major G7 economies to leave recession.
Faint signs of green shoots may also ease the political pressure on Prime Minister Gordon Brown, who faces a general election within months.
But nerves remain over the strength of the recovery – in particular the threat of a “double-dip” recession as savage spending cuts loom and the Bank of England begins to move interest rates up from their current record low.
Economists had forecasted a return to growth in the third quarter of 2009, but were caught off-guard by a shock 0.4% decline in the Office for National Statistics’ (ONS) first estimate, later revised upwards to a 0.2% fall. The first estimate is made with only around 40% of the data available, so there is “plenty of room for surprises” in today’s figures, according to Investec’s David Page.
While signs such as the first fall in unemployment for 18 months, and a gradual recovery in tax revenues are consistent with a return to growth, Mr Page added: “Official GDP estimates have been significantly revised in recent quarters. The last time a first estimate of GDP was left subsequently unrevised was the first quarter of 2007.”
There is hope for the economy and small businesses, because the end signifies the halt of a free fall and the beginning of progress. Although it should be noted that the progress might not be an instant one, but at least there are reason to smile based on the hope that the next few months should be better.
More to come on how the end of the crunch would help boost your business sales…