UK economy officially out of recession but “uncertain times” ahead

By Elliot Wright, 26th February 2010

The UK economy by 0.3% between October and December as the country exited the recession more emphatically than expected, but data also revealed that the downturn was deeper than previously suggested.

Initial estimates in January put the growth in gross domestic product at just 0.1% for the last quarter of 2009.

But figures released yesterday by the Office for National Statistics showed a larger growth, partly due to a bigger contribution from service firms.

However, the recession is now officially the deepest on record as well as the longest after figures for previous quarters were taken into account- leaving the UK peak-to-trough slump at 6.2%.

Experts are also concerned that the recovery could stall in the current quarter following the impact of the hike in VAT as well as January's snow chaos causing shoppers to stay at home.

ING economist James Knightley described the latest numbers as "encouraging" but said the current quarter had started poorly with retail sales plunging and lending data stalling.

"The momentum we had been hoping that the UK would be carrying into 2010 may be falling away already.

"Some of the weakness will be weather related, but election uncertainty and the implications for taxes and public sector employment is likely to keep sentiment and activity subdued," he warned.

David Kern, chief economist at the British Chambers of Commerce, added: "The UK recovery remains weak, and risks of a setback to growth later in the year are still serious."

But the data will relieve some of the political pressure on the Government over its stewardship of the UK through the recession as a general election looms.

Chancellor Alistair Darling told the BBC: "These are welcome figures but I cannot stress too much that we are living in very uncertain times."

Claims Financial