CAMERON FACES PRESSURE AS UK ECONOMY SLIPS INTO DOUBLE-DIP RECESSION
Britain's economy has fallen into its second recession since the financial crisis after an shock contraction at the start of 2012, heaping pressure on Prime Minister David Cameron's government as it reels from a series of political missteps.
Britain's Conservative-Liberal Democrat coalition has seen its support crumble after weeks of criticism over unpopular tax measures in last month's budget, and is under further pressure from revelations about its close links with media tycoon Rupert Murdoch.
With local elections taking place on May 3, there could hardly be worse timing for yesterday's news from the Office for National Statistics that Britain's gross domestic product fell 0.2 percent in the first quarter of 2012 on top of a 0.3 percent decline at the end of 2011.
Most economists had expected Britain's economy to eke out modest growth in early 2012, but these forecasts were upset by the biggest fall in construction output in three years, coupled with a slump in financial services and oil and gas extraction. Cameron said the figures were 'very, very disappointing'.
He told parliament: 'I don't seek to excuse them. I don't see to try to explain them away. There is no complacency at all in this government in dealing with what is a very tough situation that frankly has just got tougher.' The government desperately needs growth to achieve its overriding goal of eliminating Britain's large budget deficit over the next five years. But this will be a challenge as many of Britain's European trading partners are already in recession.
The figures pose a conundrum for the Bank of England, which had appeared poised to end its second round of quantitative easing asset buying, having said that it was more persuaded by survey evidence that the underlying economy was strengthening.
'This could be something of a game changer for monetary policy,' said Investec economist Philip Shaw.