Fears of ‘triple dip’ loom as economy suffers contraction

Official figures to be released this week are expected to show that the UK economy shrank during the final three months of 2012.

The economy was pulled out of recession in the third quarter of last year thanks to the positive impact of the Olympic Games, but economists believe businesses will have struggled to maintain growth in the fourth quarter.

Although the country will not be back in recession unless it suffers two consecutive quarters of contraction, some fear that the mere threat of a “triple dip” could be enough to knock confidence and become self-fulfilling.

Sir Mervyn King will deliver a key speech tomorrow and Investec economist Victoria Clarke said: “We have our fingers crossed that the Bank of England chief says little to trigger a new round of fears that the UK could be sinking into a further period of weakness.”

Howard Archer, chief UK and European economist at IHS Global Insight, is forecasting that Friday’s preliminary figures from the Office for National Statistics will reveal a 0.2 per cent dip in fourth-quarter GDP.