More gloomy news on economy, but Treasury won’t change course

Published on Wednesday 5 October 2011 23:54

Double-dip recession fears continued to stalk the UK, after more grim updates showed an economy stagnating and consumers shorn of confidence.

Economic growth in the first two quarters of the year was weaker than first thought, the Office for National Statistics (ONS) said, while retailer Mothercare and airline Flybe issued profit warnings.

The ONS revealed the country was in a much worse position at the start of the recovery than previously assumed, as the 2008-9 recession was much deeper than originally feared.

The data will pile pressure on the Bank of England, which will reveal the outcome of its policy meeting today – in particular, whether to roll out further emergency measures to jump-start the flagging recovery. Some economists say a renewed recession is now more likely, but the Treasury said it would not alter its austerity measures, despite the bleaker picture.

However, there was some respite, as purchasing managers index data showed the services sector rebounded in September and business investment increased 11.6 per cent in the second quarter to £30.6 billion.

Howard Archer, chief UK and European economist at IHS Global Insight, said “The risk of renewed recession has clearly risen recently.”