Any hopes that economists and politicians recently had that the UK economy was about to pull out of the recession, have now proven to be premature.
Latest official figures from the Office of National Statistics (ONS) show that instead of the UK growing its output or Gross Domestic Product (GDP) in the three months between July and September, the economy actually shrunk by 0.4 per cent.
In fact, it is the first time that GDP in the UK has contracted for six consecutive quarters since 1955 when ONS records first began, taking the total decline in output to 5.9 per cent since the official start of the recession at the start of last year.
Households and businesses alike will be left disappointed that the downturn is still not over, after what may seem like a long time of penny pinching.
The figures also mean that the UK now lags behind other European economies such as Germany and France who have already emerged from the recession.
This realisation that the UK is still knee-deep in recession has prompted some commentators to call into question the UK’s ability to return to sustainable growth anytime soon, unless there is further government intervention.
Chancellor of the Exchequer, Alistair Darling responded to the data by saying “we are not out of the woods yet,” but added that he is “confident” the economy would grow in time.
He said: “We’re not out of the woods yet, but confidence is beginning to return. Two years ago, I said this recession would be deeper and more profound than many thought. I always said it would take time to get through it. But growth will come. I’m confident about that and I’m confident that businesses and people generally will begin to see a difference in time.”
His comments however, were not echoed by the Liberal Democrats who said the data showed the recession could become the deepest ever on record.
Liberal Democrat, shadow chancellor, Vince Cable added: “For all the hopes of a quick recovery, these figures make it clear we are still in the longest and what could yet become the deepest recession on record.
"With the legacy of unemployment likely to remain for years after the end of the recession, we need radical measures to avoid repeating the mistakes of the 1990s which left millions on the scrap heap."
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So what does this mean for your finances?
Well, this shock may not necessarily be a huge cause for concern as the UK economy could yet turn its fortunes around. Still, it’s important to take note of what this may mean for your finances, particularly given the fact that unemployment is still rising. (See Confused.com’s article on how to protect against the wave of unemployment.)
According to buy-to-let website smartlandlord.co.uk, there is a chance that house prices could start falling again if a large number of people become confident enough to sell their house and flood into the market. It has also raised potential repercussions for buy-to-let investors.
Spokeswoman, Julia Surry, said: “The most respected economists disagree on the timing of a recovery and the shape of recession. What we do know is that public spending cut-backs will cause further unemployment and reduced cash going round the system.
“Buy-to-let investors and the nation's 1.5 million landlords should remain cautious.
“They need to consider the risk of more tenants struggling to pay the rent, particularly if landlord's insurance is not in place."
However, the Centre for Economic and Business Research (CEBR) says it may not all be bad news as the fact that the UK economy is still flagging could be good for those who have a mortgage.
Since the recession, interest rates have reduced significantly settling for the last four months at 0.5 per cent, and according to the CEBR this is a level that they are likely to remain at for some time. (See Confused.com’s article on interest rates.)
Charles Davis, senior economist at the CEBR, added: “We expect interest rates to remain at 0.5 per cent through 2010 and into 2011.”
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