Articles | UK recession by second half of 2008

UK recession by second half of 2008

Published: Tuesday, 2 September 2008, 12:34PM

The UK economy will fall into recession during the second half of this year, a global think-tank has said.

The definition of a recession is two successive quarters of negative growth and the Paris-based Organisation for Economic Cooperation and Development (OECD) predicts our economy will shrink 0.3 per cent in the third quarter, and by 0.4 per cent in the fourth.

OECD chief economist Jorgen Elmeskov said that, recession or not, Britain is basically stagnating, mainland Europe is doing only marginally better and the US is also looking sickly.

"I think the distinction between being or not being in recession is a bit for the birds," Mr Elmeskov said, adding: "Is a small decline in GDP really that much worse than a small increase? - I think not."

The OECD is forecasting the UK economy to grow by just 1.2 per cent for the whole of 2008, well down on its earlier forecast of 1.8 per cent. Last month the International Monetary Fund predicted the UK economy would grow 1.4 per cent this year.

In August, Bank of England Governor Mervyn King said the country will experience at least one quarter of negative growth in the coming year, while the British Chambers of Commerce has explicitly warned that Britain's economy will enter a recession within the coming year.

On Monday, sterling slumped to its lowest level for two years against the euro amid the gloomy economic outlook.

Mr Elmeskov said the basic message as far as the OECD is concerned is that the economy of the G7 club of industrialised nations - UK, US, Japan, Germany, France, Italy and Canada - is very weak.

"Continued financial turmoil appears to reflect increasingly signs of weakness in the real economy, itself partly a product of lower credit supply and asset prices," he said in a statement.