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Defiant shoppers, eager car salesmen and exporters cheered by the falling pound have helped to haul the economy back into growth after six quarters of unrelenting gloom.
Today's figures are expected to show the economy grew by upwards of 0.4 per cent in the final three months of 2009. This brings to an end, statistically at any rate, one of the most precipitous economic declines on record.
Scotland, whose GDP figures lag those of the UK, is unlikely to be able to declare an official end to recession until April. Figures for the third quarter earlier this month showed the economy here had contracted by 4.6 per cent over the year to September, but that the July-September period had seen an easing of the decline.
The UK is the last of the major economies struck by the global financial crisis to emerge from recession. Casualties have been high. Unemployment has been particularly severe among young people aged 16-24, where the numbers out of work have risen by 340,000.
Overall, the economy has contracted by 6 per cent since the recession began in the second quarter of 2008. Household-name banks and high streets across the land have been deeply scarred.
It may be years before the economy is back on its pre-recession trajectory, with growth of 2.75 per cent and above. And few are confident that, just because the recession is over, a recovery has begun. Nevertheless, it should be good news for the government, coming ahead of a general election. However, it cannot proclaim the return of a robust and resilient economy for fear of undermining its case against spending cuts.
Prime Minister Gordon Brown was insistent yesterday that the economy was still in too "fragile" a state to risk cuts to the government's spending plans.
And, judging by previous recessions, it can be 18 months or more before the technical end of a recession is followed by an upturn in the politically helpful "feelgood factor".
However, there is much to be thankful for. The deepest fears of a return to 1930s Depression have not been borne out. House prices have not collapsed as many feared. Scotland has held up well, given the near collapse of its two giant banks. And rock-bottom mortgage interest rates have helped many households to cope.
The recession itself has left big question marks.
Why, despite the most vicious contraction in memory, has unemployment not broken through three million?
And why have shoppers been so resilient, given the squeeze on household incomes and fears of a "double dip" ahead?
Unemployment has been held down by labour "hoarding" by employers reluctant to let workers go until absolutely necessary. And across the private sector, flexible working, wage freezes and pay cuts have also helped.
In addition, rather than swell the claimant count, many unemployed workers have become "consultants", part-time workers and freelancers, or have returned to university.
Household spending has been boosted by temporary stimulus measures, such as the VAT cut and the car scrappage scheme, while record low mortgage rates have helped households to pay down personal and credit card debt.
Net consumer credit fell for a fifth month running in November, by 400 million, while the major lenders reported that "total net consumer credit flows remained weak in December".
The return to growth has been broad-based. Industrial output rose by 0.4 per cent month-on-month in November, and the figures should confirm the first quarterly expansion here since the final three months of 2007.
Construction output also expanded in the second and third quarters. Exports have started to benefit from the lower pound. Scotland has also enjoyed a recent recovery in these areas. Also helping has been a recovery in the service sector, while consumer spending, which accounts for 65 per cent of GDP, has been buoyed by lower mortgage payments.
Recent CBI figures point to an upturn in orders and business optimism.
However, CBI Scotland reported last week that growth in new orders was slower than that in the previous quarter. The results disappointed expectations, but a recovery in domestic orders, together with modest growth in exports, is expected this quarter.
Throughout the UK, the question most frequently asked across business is where the recovery – and new jobs – will come from. It is in the first year or 18 months of recovery that company failures reach their peak. To counteract this, more new businesses have to be created or existing ones expanded. But business investment is still sluggish.
Bank lending to business edged up by 100m in November, marking the first rise for ten months. But there have been indications of a weakening of net lending in December – hardly the stuff of a vigorous business recovery.
The Bank of England will also have to wind down its quantitative easing programme, while higher than expected inflation has brought fears interest rates may have to be raised in the second or third quarters of the year – much earlier than expected.
Then there is The Reckoning to come – the huge overhang of government borrowing. At some stage over the next 18 months, that is going to require substantial cuts in government spending, as well as tax rises. As many as 300,000 public-sector jobs could be cut before the deficit is brought down to manageable levels.
Mark Bolsom, of City firm Travelex, says: "For our business customers, credit conditions remain extremely tight and the prospect of higher taxes and public spending cuts are not reassuring. For many businesses, economic recovery remains completely intangible. They still have to make redundancies and slash budgets, as their recovery remains sluggish.
"We think that the chances of a double-dip recession cannot be ruled out. Unfortunately, we forecast a bumpy couple of years for UK consumers and businesses."
Triggers for economic woe
THIS recession – which today is officially expected to be declared over – is the longest since Margaret Thatcher took power more than 30 years ago, and has run for six consecutive quarters.
But its origins in the banking crisis are different to its immediate predecessors.
The last recession was during John Major's government and, although he won an election during that time, ultimately it caused the downfall of his Conservative government.
Lasting for five quarters between 1991 and 1992, the slump saw unemployment rise to more than 3.5 million – more than 10 per cent of the working population.
A stockmarket crash in the late 1980s and the decision to take the pound into the Exchange Rate Mechanism (ERM) triggered this recession. It took 13 quarters for the GDP to return to its pre-recession level.
This period of economic gloom lasted for six quarters and saw company earnings decline by 35 per cent. Unemployment increased by 124 per cent
leading to huge social unrest with riots in Bristol, Brixton, Manchester, Birmingham and Liverpool.
It took 13 quarters for the economy to recover.
This recession was triggered by an oil crisis which saw a massive hike in fuel costs and an increase in trade union militancy
Inflation peaked at 20 per cent and the currency was devalued.
It took 14 quarters to recover and left Labour out of power for 17 years.
Teetering banks, a housing slump and negative growth
2008 9 JANUARY World Bank predicts slowdown in world's economy.
21 JANUARY Stock markets globally suffer their biggest falls since 11 September, 2001.
17 FEBRUARY Government announces it will nationalise Northern Rock.
7 APRIL The 100 per cent mortgage is withdrawn from the British housing market.
22 APRIL RBS announces a 12 billion rights issue to stave off collapse.
30 APRIL First annual fall in UK house prices for 12 years is officially recorded.
30 AUGUST Chancellor Alistair Darling warns that the UK is facing the worst recession in 60 years.
15 SEPTEMBER Wall Street bank Lehmann Brothers files for bankruptcy, triggering worldwide loss of confidence.
17 SEPTEMBER Lloyds announces it is to take over HBOS in a government brokered deal to prevent the Scottish bank from going under.
29 SEPTEMBER Bradford and Bingley is nationalised. Iceland's third largest bank Glitnir is nationalised, and others follow soon after. US Congress rejects a $700bn rescue package for Wall Street.
13 OCTOBER UK Government injects 37bn in RBS, Lloyds and HBOS to rescue them from collapse.
6 NOVEMBER Bank of England slashes interest rates from 4 per cent to 3.5 per cent.
24 NOVEMBER Mr Darling cuts VAT to 15 per cent. Scottish Government allowed to bring capital spending forward to stimulate the economy.
27 DECEMBER Woolworths closes its doors for the last time. Other casualties of the downturn over the winter include Zavvi and MFI.
2009 8 JANUARY Bank of England cuts interest rates to 1.5 per cent, their lowest level in the Bank's 315 year history.
23 JANUARY Britain officially declared as being in recession, after figures showed that the British economy contracted in the last two quarters of 2008.
5 FEBRUARY Bank of England cuts rates to 1 per cent
10 FEBRUARY RBS and HBOS apologise "profoundly and unreservedly" for collapse
2 APRIL G20 summitdiscusses ways of countering the recession with $1.1 trillion package. Gordon Brown praised for his leadership.
22 APR The Chancellor says the economy will contract by 3.5 per cent and announces extra borrowing of 178bn, taking UK debt up to 10 per cent of GDP. Scotland officially enters the recession.
10 JUNE BP reveals that in 2008 oil consumption fell for the first time since 1993.
15 JULY UK unemployment rose by a record quarterly figure of 281,000 to 2.38 million. In Scotland it rose to 179,000 – up 35,000 in the same period.
3 AUGUST Barclays announces 8 per cent rise in first half profits
30 OCTOBER Off licence traders Threshers declared bust.
2010 21 JANUARY Figures reveal from 1 September to 30 November 2009 unemployment in the UK fell by 7,000 but rose in Scotland by 9,000.
26 JANUARY UK expected to no longer be in recession
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