Britain faces an unprecedented triple-dip recession after the economy contracted by 0.30% in the last quarter of 2012. The news took analysts, who had expected a decline of 0.10%, by surprise and means that the world’s sixth largest economy flat lined in 2012 as a whole. If GDP shrinks again in the first quarter of 2013, it would be the first time Britain has suffered a triple dip since records began in 1955.
The Chancellor George Osborne admitted that Britain is facing “very grave difficulties because of the debts built up over many years and problems abroad with the eurozone, where we export most of our products, in recession.” But he rejected the labour opposition’s accusation that he was cutting public spending too deep and too fast. Osborne said, “We can either run away from those problems or we can confront them, and I am determined to confront them so that we can go on creating jobs.”
The latest GDP figures increase fears that Britain may be in danger of losing its coveted triple-A credit rating. Last month, voicing concerns over the state of public finances and its slow recovery, Standard & Poor’s backed Moody’s and Fitch by placing the UK’s rating on “negative” watch. But John Hawksworth, chief economist at PwC, said, “These are only preliminary estimates, however, and could be subject to later upward revision given that recent employment data, in particular, remain much stronger and the implied fall in productivity growth over the past 18 months looks implausibly large.” Some other analysts agree, pointing to the latest British unemployment figures, which showed that there were 500,000 more people in the workforce in the quarter ended November 2012 than in the previous year. Overall, the employment rate was 71%, the highest since records began in 1971. The apparent dichotomy between a flatlining economy and a robustly performing employment market continues to perplex many analysts.