Economists fear that Britain’s economy could be heading for disaster as GDP falls 0.7% for the second quarter of this year - its biggest drop since 2009.
The Office for National Statistics’ (ONS) GDP report was issued just days after Ernst and Young made predictions that the UK’s double dip recession was over with recovery ‘on the way’. The ONS statistics paint a significantly different future for Britain's economy.
Although a drop was expected due to the extra Jubilee bank holiday and the poor weather conditions, economists had not envisaged that the situation would worsen so dramatically. The construction sector also faced blame as its output has plummeted by 9.7% in 6 months.
Economists had hoped that the Olympics would provide a boost however due to the effects of the Eurozone debt crisis and Greek’s early exit, this has not been the case.
Azad Zangana, chief economist at Schroders suggested that the ONS figures could mark the beginning of a rocky path ahead for British economy. He said:
“A renewed crisis in the eurozone will lead to a further collapse in business confidence and investment.”
The shock statistics have led to many economists speculating about what will happen next. Many of these have followed a similar pattern - Britain’s economy will continue to grow steadily for the rest of the year with the Olympic happenings and then drop significantly next Spring.
“The economy will continue to grow until March, he said, before two consecutive quarters of negative growth.”
Citigroup’s Michael Saunders dropped his GDP growth projections for 2013 from 0.5% to 0.3% with concerns that Britain’s recession could be due a triple dip, describing this as a 'disasterously bad outcome'.
While Peter Spencer, economist adviser at ITEM said that consumers themselves would be a driving force for economic recovery in 2013 and urged for concentration on “reducing debt burden rather than splashing the cash.”