After months of conjecture, official figures confirmed today that the UK’s economy contracted again in the fourth quarter after only three months of growth.
The Office for National Statistics (ONS) said that GDP decreased by an estimated 0.3% in the final quarter of 2012 compared with the preceding three months.
In the third quarter the economy had grown by 0.9%, ending nine months of contraction, although that quarter was boosted by ticket sales for the London 2012 Olympic Games. The subsequent fourth-quarter decline in the sports activities, amusement and recreation sector contributed 0.2 percentage points to the overall fall in GDP growth.
Also contributing to the decline was a significant drop in the mining and quarrying sector, which was partly due to an extended and later than usual maintenance period at the UK’s largest North Sea oil field. Excluding oil and gas extraction, GDP fell by 0.1% between the third and fourth quarters.
Elsewhere in the economy, manufacturing fell by 1.5% compared with the prior quarter and the services sector was flat, while construction output rose by 0.3%.
For the year as a whole, GDP is estimated to have been flat between 2011 and 2012.
Commentators are divided over whether the contraction in the last quarter signifies the start of the UK’s third recession in five years, or whether such fears are premature and there are signs that activity will pick up in the first three months of the new year. All are united, however, in calling on the government to do more to get the economy moving.
Ed Balls, shadow chancellor for the opposition Labour Party, claimed that the prime minister had been complacent and urged the chancellor to “listen and act now to give direct help to struggling families and businesses.”
Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said that the overall picture for manufacturing in 2012 is the weakest since 2009, although there are some factors indicating that things will improve in the year ahead. For example, the threat to the euro has diminished, the employment picture is better than expected and manufacturers are continuing to look to new markets for growth.
Hopley urged the government to get capital projects moving and be clearer about its economic priorities in order to instill more confidence among businesses about investing for the future.
This sentiment was echoed by John Longworth, director general of the British Chambers of Commerce, who said that British businesses need politicians to do everything they can to kick-start growth.
A note of cautious optimism came from Graeme Leach, chief economist at the Institute of Directors, who urged people to “hold back on the doom and gloom” and pointed out that the underlying figures show flat output. “If the recent slight pick-up in money supply growth can be sustained, the UK economic outlook in 2013 will be better than people expect,” he predicted.