The disappointing growth figures announced today show that the UK economy is unlikely to revive any time soon unless the government admits its failings and starts to change course
Today’s GDP figures will no doubt see much commentary focused on how the UK now faces the risk of an unprecedented triple-dip recession, but rather than looking at one or two quarters of data it is usually more sensible to take a longer-term view.
It has now been ten quarters since the ‘emergency’ Budget of 2010. Since then the economy’s performance has been disastrous.
Whether we get a triple dip or not is actually beside the point - we’ve already had two and a half years of stagnation. Since the second quarter of 2010 the economy has managed growth of just 1.1% against the Office for Budget Responsibility's original forecast of 6.5%.
This large miss is partially explained by the OBR using estimates of the fiscal multiplier that turned out to be far too low.
The economy is still around 3.4% below its pre-recession level - and if the average pace of the last two and half years were to be repeated it would be almost another eight years before we regain 2008 levels of GDP.
GDP per capita - a more important driver of living standards than headline GDP as it accounts for the rising population - fell in 2011 and 2012.
We are performing badly relative to our international peers and terribly against our own historical recoveries.
The third quarter was boosted by special factors such as Olympic ticket sales and the timing of bank holidays - the second quarter was depressed by the Jubilee. Today’s figures allow us to look at 2012 as a whole with fewer distortions. We had zero growth.
This morning’s release contains no evidence that the much hoped for ‘rebalancing’ is occurring. Manufacturing output is lower than in Q2 2010 and construction output has dropped by almost 10% in the same period.
The record of the last two and half years is of a flat-lining economy, a huge squeeze in real incomes and a fiscal target that has now been missed. We might get a triple dip with the next set of figures or we might not - either way weak growth is set to continue with the latest independent forecasts pointing to growth of just 0.9% in 2013 as a whole.
Unless the Government changes course, the long slump will carry on.
Duncan Weldon is senior policy officer in the Economic and Social Affairs Department of the TUC. This post first appeared on the TUC’s Touchstone Blog
