By Martin Kelly
The UK is in the grip of the worst recession in half a century as figures released today show the economy shrank by a staggering 0.7% in the last quarter.
UK Chancellor George Osborne is now under intense pressure to change his economic strategy in order to address the worsening situation.
By Martin Kelly
The UK is in the grip of the worst recession in half a century as figures released today show the economy shrank by a staggering 0.7% in the last quarter.
UK Chancellor George Osborne is now under intense pressure to change his economic strategy in order to address the worsening situation.
The Office for National Statistics said the fall was largely due to a sharp slowdown in the construction sector.
Today’s figure showing a contraction of 0.7% was more than double what analysts had predicted. Not unexpectedly, the sector taking the brunt was construction which decreased by 5.2 per cent over that last quarter which follows a contraction of 4.9 per cent between Q4 2011 and Q1 2012.
The 0.7% fall in UK GDP is over double that of the first quarter of 2012 which saw the economy shrink by 0.3%. It also means the UK economy has contracted for three successive quarters, having contracted by 0.4% in the last quarter of 2011.
The 0.7% drop in UK GDP for this second quarter will have consequences for the Scottish economy which itself shrank narrowly by 0.1% in the previous quarter.
The Scottish government has consistently called for more support for capital spending and has already listed 32 projects north of the border it says are ready to go.
Commenting, SNP Treasury spokesperson Stewart Hosie MP said the decrease in construction sector output underlined the real need for the Treasury to increase capital investment to boost employment.
Mr Hosie, a member of the Treasury Select Committee, said:
“We are all paying the price of the Chancellor’s austerity strategy, and the GDP figures are further evidence of why we now need an urgent change in direction by the Treasury.
“The decrease in construction sector output highlighted by the ONS shows the real need for capital investment in shovel ready projects, as has repeatedly been demanded by the Scottish Government, to keep the economy moving and keep people in work.
“Unfortunately, the UK Government is not listening – and that, once again, shows why Scotland needs to secure real economic powers.”
Last week the IMF warned that the UK Coalition Government faced having to rein back its austerity measures if the economy showed no signs of recovery. According to the world body, Mr Osborne’s cutbacks contributed the UK’s economic contraction.
The IMF also warned that a continuation of these policies could lead to the UK being unable to take advantage of any future economic upturn.
Shadow Chancellor Ed Balls said: “If these figures don’t make the chancellor wake up and change course, then I don’t know what will,”
He added: “Thank goodness the Olympics will give our economy a much-needed shot in the arm. But this short-term boost is not enough – we need a plan B now to get the economy moving again and radical reforms to set Britain on a new course for jobs, growth and long-term prosperity.”
Last week the Scottish government called on Johann Lamont’s Scottish Labour party to join SNP calls for funding for the 32 ‘shovel ready’ projects in Scotland.
First Minister Alex Salmond called on the UK Coalition to introduce a £5 billion cross-UK package that would include £400m for the 32 Scottish infrastructure projects.
