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Recession forecast as big freeze brings halt to UK plc

PROLONGED snow in many parts of the UK is fuelling fears the economy will enter a triple-dip recession this quarter.

Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "With the bad weather looking to continue well into this week and possibly beyond, the threat to the economy and risk of a triple-dip recession are growing by the day."

He added: "Given the UK's ability to grind to a halt with even a flake, the snow has come at a very brittle time for the economy, adding to the headwinds.

"Obviously the longer the snow and freezing conditions last, the greater will be the disruption to economic activity, and the bigger the risk that the first quarter of 2013 will see contraction in GDP [gross domestic product] following a likely renewed modest dip in the fourth quarter of 2012."

Mr Archer noted there had been significant snow in the first quarter of 2012, the fourth quarter of 2011 and the fourth quarter of 2010; quarters in which GDP fell.

Bad weather, he said, prevented consumers from getting to shops, restaurants, pubs and entertainment venues; while some people were unable to get to work and others had to stay at home to look after children because schools were shut.

He also cited the impact on construction work, and on supply chains arising from difficulties in moving goods, components and raw materials.

Mr Archer highlighted a possible impact on revenues and profits of airlines, freight companies and other transport providers if airports were shut and the transport system gridlocked.

The independent National Institute of Economic and Social Research think-tank estimated earlier this month that GDP would have fallen by 0.3% in the fourth quarter of 2012. Fourth-quarter GDP figures are due on Friday.

The UK's recovery from the deep recession of 2008/09 proved short-lived. The economy fell into double- dip recession – contracting during the period from October 2011 to June 2012 – before temporary factors helped it rebound in the three months to September.

Recession constitutes at least two quarters of falling GDP.

Between the UK's 2008/09 and October 2011 to June 2012 recessions, GDP fell in a single quarter in the final three months of 2010.

Contextual targeting label: 
Weather

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