Graeme Leach, Chief Economist at the Institute of Directors, has agreed with George Osborne.
The Chancellor has said that there should be no slow down in the deficit reduction, despite the latest GDP figures:
Although the fall in GDP in the first quarter was relatively small, the impact on the economy will be much greater because of the knock to consumer and business confidence.
Confidence has already take a battering from the euro crisis and today’s news means companies are less likely to boost investment and recruitment this year.
But even though we are back in recession, the IoD does not believe we should slow down on deficit reduction.
The CBI was surprised by the announcement from the ONS that the UK is back in recession. John Cridland, CBI Director-General, said:
This disappointing news comes as something of a surprise. Since the turn of the year, business confidence has improved and, while still challenging, underlying economic conditions also appear to have strengthened.
In particular, the weakness of the services sector data does not tally closely with a range of survey indicators suggesting that the sector has been picking up through the first quarter.
Looking forward, there are indications that the economy is slowly recovering from the blow to confidence and activity which resulted from last autumn’s turmoil in Eurozone financial markets.
So we are in double dip - if you run a company do the numbers actually make any difference to you?
Currency traders say double dip figures have already had 'significant and negative effect on the pound'
Unscientific verdict from your Twitter replies is that the numbers do matter because of confidence - they could make cautious spenders tighten purse strings altogether.
– Ed Balls, Shadow Chancellor
David Cameron and George Osborne complacently boasted their austerity plan had taken our economy out of the danger zone, but their failed policies have plunged us back into recession.
We consistently warned that their austerity plan was self-defeating and that cutting spending and raising taxes too far and too fast would badly backfire. David Cameron and George Osborne arrogantly and complacently dismissed people who warned of the risk of a double-dip recession and the country is now paying a very heavy price. Their economic credibility is now in tatters.
The Chancellor, George Osborne has told ITV News that the UK being back in recession is 'very disappointing.'
Commenting on today’s GDP figures showing that the economy is back in recession, John Walker, National Chairman, Federation of Small Businesses, said:
It is worrying that we are back in recession and proves that 2012 is going to be a difficult year for the economy. High inflation will continue to squeeze business and consumer spending and falling GDP in the eurozone will impact key trading partners.
Planned increases in fuel duty due later this year will also hit as fuel prices continue to rise, damaging bottom lines. In order to strengthen economic recovery, Government policies must be bold to have an effect on the ground to boost business investment and job creation as well as consumer confidence.
The ONS's first estimate is done before more than half of the data has been gathered and some economists are hopeful that today's figure will be revised higher in coming months.
But economists warn that the economy will continue to struggle amid stubbornly high inflation and rising unemployment, while confidence and exports will be hampered by the eurozone debt crisis.
There are fears that the extra bank holiday for the Queen's Diamond Jubilee will hit the current quarter, and it is not known what impact the Olympics will have in the summer.
Economic forecaster IHS Global Insight's reaction to GDP in the first quarter of 2012:
Along with the Bank of England and many other analysts, we are hugely sceptical about the first-quarter GDP data showing contraction of 0.2% quarter-on-quarter.
Nevertheless, the fact is that the data - for now at least - show a 0.2% quarter-on-quarter drop in GDP in the first quarter which means that the UK is officially back in recession as it follows a drop of 0.3% quarter-on-quarter in the fourth quarter of 2011. This will undoubtedly lead to negative headlines which could well hit consumer and business hard and make sustainable growth harder to achieve in the near-term at least.
We strongly suspect that sometime down the line that the GDP data will be revised up to show modest growth in the first quarter, but by then the recession headlines will have been written.
Commenting on the news that the UK economy is back in recession, TUC General Secretary Brendan Barber said:
This is worse than expected. There has been no growth over the last year, and the economy is 0.5 per cent smaller than six months ago.
Austerity isn’t working. The government should look across the Atlantic and follow President Obama’s alternative that has reduced unemployment and brought growth back to the USA.