Recession ends – but that’s no help for 1,400 Ford workers

THE decision by Ford to end 101 years of vehicle assembly in the UK yesterday highlighted serious doubts over the strength of the economy – despite gross domestic product figures showing that the recession is over.

The motor giant announced it is to close its Transit van manufacturing plant in Southampton and a tool centre in Dagenham, costing 1,400 jobs.

It came as a severe blow for the UK government on a day ministers were expressing cautious optimism as the Office of National Statistics (ONS) revealed the economy had risen by 1 per cent in the last quarter – the biggest increase in five years, and much stronger than expected. It meant that the UK is now officially out of recession.

However, Chancellor George Osborne said that while the UK was on the right track, there was “still a long way to go”.

The country has been battling against sluggish consumer spending, government cuts and high unemployment, while the eurozone’s problems have hit exports.

While the third quarter beat expectations and grew at the fastest pace since the third quarter of 2007, the economy is still 3.1 per cent below its peak of the first quarter of 2008. Mr Osborne said “many economic challenges, at home and abroad” remained.

“By continuing to take the tough decisions needed to deal with our debts and equip our economy for the global race we’re in, this government is laying the foundations for lasting prosperity,” he claimed.

Shadow chancellor Ed Balls welcomed the economy’s emergence from recession but said the government needed to do more to “secure and strengthen” growth.

“Our economy desperately needs an injection of confidence. But this is no time for complacency and wishful thinking,” he said.”

The UK GDP figures were also welcomed by Scotland’s finance secretary, John Swinney, but he warned that the “Olympics effect” may have made them look better than they would have otherwise been.

It is understood that more than half of the quarterly increase is attributable to the Olympics and the reversal of the Jubilee effect in the second quarter.

Mr Swinney said: “These figures are influenced by one-off factors such as a bounceback in activity from the lost output due to the extra [Jubilee] bank holiday last quarter and the inclusion of all Olympic Games ticket sales in August.

“Olympic ticket sales alone added 0.2 percentage points to overall growth this quarter.”

Business leaders suggested the economy may have turned the corner, with expectations of more positive news to come in the months ahead. CBI director-general John Cridland said: “We expect conditions to remain positive going into the fourth quarter, reflecting some easing of the pressure on household budgets from lower inflation. But the global economic environment remains challenging.”

But with fears that the German economy is about to be hit by stagnation, with further problems in the eurozone, others warned that the UK economy faces many more difficulties.

Graeme Leach, chief economist at the Institute of Directors, said: “The bounce-back in GDP growth is good news, but not enough to pop the champagne corks.

“The key message is that we’re out of recession but uncertain where we’re going. Not for the first time, we need to heed the warning that you can’t see the road ahead through the rear view mirror.

“Our view is that growth will continue in [the fourth quarter] but we have to recognise there could be a fallback.”

Howard Archer, economist at IHS Global Insight, said that the UK was “far from out of the woods” and it was “premature for the Chancellor to contemplate singing in his bathtub”.

The economy is expected to continue growing in the quarter from October to December but at a much slower rate, with City predictions coming in at around the 0.3 per cent mark.

The largest contribution to the surge in GDP came from the services sector, which makes up about 7 per cent of the total economy and grew at 1.3 per cent, following a 0.1 per cent drop in the previous quarter, the ONS said.

Industrial production increased by 1.1 per cent between July and September, according to ONS figures after a 0.7 per cent decline in the previous quarter.

However, the key construction sector remained under pressure in the third quarter, shrinking 2.5 per cent after a 3 per cent drop in the previous quarter.

Within the services sector, the index of distribution, hotels and restaurants rose 1.6 per cent, the transport sector grew 0.8 per cent, business services and finance increased by 1 per cent and government services lifted 1.6 per cent.

But the figures came as unions branded Ford’s decision to end vehicle assembly in the UK as “a betrayal”, ending a 101-year era since the first Ford factory outside North America was opened in Trafford Park, Manchester, in 1911.

Production of Transit vans will end in Southampton next summer and will be consolidated at the plant in Kocaeli, Turkey, with the loss of more than 500 jobs. A tooling plant in Dagenham will also go.