Britain narrowly escapes the recession

12:58 26 January 2010

After six continual quarters of contraction, the British economy has emerged out of the longest and deepest recession since the second world war.

The Office of National Statistics (ONS) has recorded that the last quarter saw growth for the first time since April 2008, with an increase of 0.1% between October and December.

However the expansion is lower than the expected 0.4% rise.

Britain is the last of the major economies to return to growth after the global credit crunch. The US, Japan, China, Germany and France all climbed out of recession in the third quarter last year, between July and September.

Government initiatives such as the car scrappage scheme may have contributed to the rise, which saw the nation's first expansion of gross domestic product (GDP) in 18 months and surface from the longest and deepest recession since ONS records began in 1955.

The report also showed that GDP fell by a record 4.8% in 2009, at the fastest pace of decline in a single year for 88 years, and fell 6% in total throughout the downturn.

Analyst Jonathan Loynes from Capital Economics remained reserved about the news, saying: "The Q4 GDP figures are a major blow to hopes that the UK economy had emerged decisively from recession in Q4.

"No doubt some commentators will claim that the figures are under-estimating the true strength of the recovery and will be revised up in time.

"That is certainly possible. But it won't change the big picture of an economy still operating way below both its pre-recession and trend levels of output."

Chancellor Alistair Darling said that the economy is on the path to recovery but was cautious.

He said: "I've always said that because of all the uncertainty around we should be very cautious.

"There's a lot of uncertainty around the world - there will be further bumps along the road, there's no doubts about that.

"I think we are now on a path to recovery. I am confident that the steps we have taken have put us on the right path."

The ONS reported that the increase in output was mainly due to increases in distribution, hotels and restaurants and government.

However, the figures are only the first of three readings of GDP for the fourth quarter by the ONS, the second will be on February 26 and the third in March.

The first reading is so low that a downward revision could still leave the country in recession.