Britain’s 18-month-long recession - its worst in more than 30 years - was officially declared over on Tuesday after figures showed the economy grew by 0.1 per cent in the last quarter of 2009 bringing to an end six consecutive quarters of shrinking growth.
Britain had been the only major economy in Europe still in recession brought about by the unprecedented global credit crunch and compounded by a massive public borrowing that has left it with a staggering £178 billion budget deficit.
Even as the news brought cheer to the City - London’s famous financial district - and boosted Labour Party’s morale in the run-up to the general election, expected in May, experts warned that the economy was not yet out of the woods.
The fragile nature of the recovery was underlined by the fact that the growth figures were below what the analysts had predicted sparking fears that the economy could slide back into recession if the fiscal stimulus was withdrawn prematurely.
Business Secretary Peter Mandelson said businesses still faced a long struggle
“They’ve had to cut costs, which might actually strengthen them in the long term, but in the meantime it is tough medicine for some people… We’re going to have to continue to be careful during the course of this year,” he told Sky News.
Britain’s recession began in the April-to-June quarter of 2008, and was the deepest and longest since quarterly figures were first recorded in 1955. Analysts cautioned against premature celebration pointing out that a sustained period of stability was needed to avoid a relapse.
“We’re at the beginning of a move forward, and that’s a positive message. But the reality for many individuals and many companies is it’s still going to be very tough this year,” Miles Templeman, head of the Institute of Directors said.
Declaring that the recession was technically over, the Office for National Statistics (ONS) said the U.K.’s production and service sectors each grew by 0.1 per cent during the quarter. The upturn was said to have been driven by the service sectors with hotels and restaurants contributing a great deal. Manufacturing also showed signs of recovery.
There was concern that the GDP fell by a record 4.8 per cent in 2009. Experts said this was a ``major blow” to the hopes of an early and faster recovery.
“No doubt some commentators will claim that the figures are under-estimating the true strength of the recovery and will be revised up in time. That is certainly possible. But it won’t change the big picture of an economy still operating way below both its pre-recession and trend levels of output,” one leading analyst was reported as saying.
Political reaction was along predictable lines with the Chancellor of the Exchequer Alistair Darling declaring that the country was now “on a path to recovery” but the Opposition playing down government claims.
“Let’s be clear — this is about as weak growth as you can get,” Shadow Chancellor George Osborne told the BBC.
Liberal Democrat Shadow Chancellor, Vince Cable, said: “Far from the quick recovery the chancellor has been praying for, the economy is only just staggering back into growth.”