Figures from the Office for National Statistics (ONS) show today that the UK economy shrank by 0.3 per cent in the last three months of 2012, fuelling fears that the economy could re-enter recession.
According to the ONS the fall in output was largely due to a drop in mining and quarrying, after maintenance delays at the UK’s largest North Sea oil field; with the sector’s output falling by 10.2 per cent, the biggest decline since records began in 1997.
If oil and gas extraction were excluded from the overall gross domestic product (GDP) calculations, then the data would have shown that the economy shrank by only 0.1 per cent in the fourth quarter.
The figures were worse than expected and could put pressure on the government to consider a “Plan B” that would stimulate demand, although the Chancellor has insisted as recently as yesterday (January 24th) that he will not reconsider his austerity measures programme.
However, the prospect of a triple-dip recession, which will become official should the economy contract again in the first quarter of 2013, is expected to further dent the confidence of consumers and companies, hitting high street spending and business investment.
The contraction in GDP in the last three months of 2012 followed a near 1 per cent rise in GDP in the third quarter when the economy had been boosted by the London Olympics.
The economy remains 3.5 per cent below its peak in 2007 and is not expected to regain its previous level for at least another two years, making it the longest recovery in 100 years while in the words of the ONS, the underlying picture was flat over 2012, with the economy working well below its potential.