Chancellor Alistair Darling admits recession could return

Chancellor Alistair Darling admits recession could return

Mr Darling admitted there would be “further bumps along the road” to recovery and accepted a “double dip” in the country’s economic fortunes was a possibility.

Britain limped out of the longest and deepest recession since before the war in the last three months of 2009 with a marginal 0.1 per cent expansion in the GDP.

The level of growth was down on what had been expected and analysts have warned it could signal a quick return to recession later this year.

Mr Darling dismissed suggestions that the end of the downturn had been less than decisive, insisting his projections for an annual growth of between 1 per cent and 1.5 per cent, remained on course.

But he admitted there could be a return to recession in the next quarter which could see crucial economic figures released just before a possible general election.

Speaking to BBC Radio 4’s The World At One about today’s Office of National Statistics figures, Mr Darling said growth was “always going to be moderate” this year.

“There are many bumps along the way, we are not out of the woods yet, so I think my caution is right,” he said.

Asked again if there was a possibility of a “double dip” return to recession he said: “You can see there’s a lot of uncertainty. Therefore you would expect as we come out of recession things to fluctuate.”

Shadow Chancellor George Osborne said any growth was welcome but said the 0.1 per increase in GDP was “very weak”.

He added: “These very weak growth figures show that Gordon Brown’s Government left us badly prepared for the recession and badly prepared for the recovery. We urgently need a new model of economic growth that includes a credible deficit reduction plan that keeps mortgage rates low, creates jobs and doesn’t choke off recovery.”

The 0.1 per cent growth in the last three months of 2009 was the first positive figure for six consecutive quarters, but was down on the 0.4 per cent which many had been expecting.

Mr Darling insisted there were “many reasons to be confident”, given lower than expected levels of unemployment, repossessions and business failures.

Mr Darling said measures like the temporary reduction in VAT, the car scrappage scheme and investment in helping people back to work were “all making a difference”.

The UK was one of the last remaining major economies still in recession after the US, France and Germany all emerged from their slumps last summer.

Jonathan Loynes, an analyst at Capital Economics, said today’s figures were “a major blow” to hopes that the UK economy had emerged decisively from recession.

He added: “With household incomes under pressure, credit in short supply and a major fiscal squeeze looming, the path to a full recovery is going to be a long and bumpy one.

“We still expect average GDP growth of a below-consensus 1 per cent or so in 2010.”

IHS Global Insight economist Howard Archer said: “While the UK may be officially out of recession, it is far from out of the economic woods.

“Economic and financial conditions are still very challenging and the UK faces a tough job to build a decent recovery.”

Liberal Democrat economic spokesman Vince Cable warned that the economy remained “fragile”.

He told GMTV: “The British economy has had the economic equivalent of a heart attack. It is still fragile. It is still dependent on artificial money creation, on enormous government deficit, the banks are still not working properly.

“All these things are going to have to be sorted out before we can talk about any kind of meaningful recovery.”