Quarter Doubled

Was The UK’s Quarter Four Downturn Completely Unexpected?

So UK readers, here’s hoping you’re away on Caribbean holidays , unless you really like seeing the economy crumble around you. Well, assuming that your crazy queen-notes are still capable of buying getaways of course. The outlook for the British economy has never exactly had the character of the tropical sun, but with talk of a double dip recession, things are looking ever gloomier. The gamble to tackle the country’s deficit as soon as possible may have backfired. Confidence in the government’s plans was particularly shaken by an Office of National Statistics (ONS) report that revealed a massive and sudden downturn in British GDP for the last quarter of 2010.

But the exact source of the downturn remains disputed, with the coalition government more than happy to point the finger elsewhere. The UK and several other western European countries were subject to a particularly cold December which caused major travel disruption. Those who had hoped to leave the UK and escape to Antigua holidays and the rest of the warmer world found themselves miserably grounded. But their spending power was equally useless in the high-street, with many roads inaccessible, and public transport excessively lacking. Retail was utterly shaking, suggesting that a GDP downturn was possible. Profits were revised and even big high-street names like HMV felt the need to axe ten percent of their stores in an effort to streamline their business.

Nonetheless, economists are warning that the ONS’s GDP figures are estimations only, and that having never experience such a harsh Christmas period, the doom and gloom estimation may far exceed the reality. However, the ONS is usually a pretty accurate source of information: previous estimates have never been more than 0.5 percent away from the truth. It also seems apparent that the UK economy experience a dire quarter four.

The problem the UK faces is that the scenario isn’t getting any better. Public sector job cuts are a looming sword of Damocles over many and increased VAT has done little to assure the British buyer that they should start spending again. The hope is that there will be some kind of U-turn in the country’s next budget, scheduled for March. Meanwhile, it’ll be Barbados holidays for only the privileged few.

Economic growth decreasing demand?