Brown admits UK facing recession
Wednesday, 22 October 2008 12:00 AM
The prime minister has admitted the UK is heading into recession for the first time.
Following Bank of England's governor Mervyn King statement last night that it now seems likely that the economy is entering a recession, Gordon Brown admitted the same.
During prime minister's questions, Mr Brown said: "Having taken action on the banking system, we must now take action on the global financial recession which is likely to cause recession in America, France, Italy, Germany, Japan and - because no country can insulate itself from it - Britain too."
Tory leader David Cameron called on the prime minister to revoke his statement that he had brought periods of boom and bust to an end.
"He claimed the credit in the boom, why won't he take responsibility in the bust?" Cameron said.
However, Mr Brown hit out at the Conservatives for failing to understand the international source of the downturn.
The UK economy how looks certain to be heading to a recession.
Today the National Institute of Economic and Social Research (NIESR) published a forecast showing 2009 to be a year of recession - technically defined as two consecutive quarters of economic contraction.
On Monday, the Ernst & Young ITEM Club forecast a one per cent contraction of the economy in 2009 - the first annual year of negative growth since 1992 - and it will grow by one per cent only in 2010.
The UK economy is facing a buffeting from a number of ill winds. Recent rises in food, fuel and energy prices have hit consumers and lowered levels of consumption.
At the same time the credit crunch is making it hard for people to borrow - meaning the credit bubble that fuelled recent consumption has now popped.
The slowing housing market is also hitting consumption - with NIESR estimating a 0.5 per cent fall in GDP can be attributed to a ten per cent fall in house prices.
Official statistics out at the end of September showed GDP growth was 0.0 per cent in the second quarter of 2008. However, some analysts feel this number could well be revised to show any recession started in May.
Official for National Statistics (ONS) figures for the third and fourth quarters are expected to show contraction.
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