(Oct. 23, 2009)
Shock figures showing that Britain is still struggling through recession sent the pound plunging and threw fresh doubt over Alistair Darling’s plans to
inflatable water games cut the national debt.
The City and Downing Street were stunned as output data revealed that the economy shrank by 0.4 per cent between July and September — an unprecedented sixth consecutive quarter of decline.
The figures dashed predictions that Britain was emerging from recession and dealt a blow to Gordon Brown’s hopes of an economic recovery taking root before the election. The pound, which had been trading at €1.111 and $1.6693, collapsed against the currencies to €1.087 and $1.6323.
Economists had predicted that output was growing by 0.2 per cent.
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Chris Williamson, chief economist at Markit, which conducts surveys on the state of the economy, said that yesterday’s figures were wrong and could lead to
pearl jewelry wholesale “disastrous policy mistakes”.
Output has dropped 5.9 per cent since the recession began in the second quarter of last year. In the 1980s output fell by 6 per cent.
The lingering slump comes despite record low interest rates, extra government spending and a £175 billion boost to the money supply through quantitative easing. Last month, Mr Brown had said that Britain was coming out of recession. He told the BBC: “I think you will see figures pretty soon that show the action that Britain has taken yielding effect.”
Retailers used yesterday’s data to call on the Chancellor to keep VAT at 15 per cent to boost the January sales.
The Treasury insisted that the VAT rate would be restored to 17.5 per cent on January 1 as planned. But pressure is likely to intensify over the weeks running up to the Pre-Budget Report.Richard Lambert, the Director-General of the CBI, said that changing the
pearl jewelry rate of VAT at midnight on December 31 would create practical problems for businesses and that the current rate should be extended.
Sir Stuart Rose, executive chairman of Marks & Spencer, told The Times: “If the Government could delay for one week or two that would make an enormous difference. We have made pleas to the Government already but it doesn't seem to have made any difference.”
In an interview this week Sir Philip Green, who owns Topshop, said that it was inevitable that VAT would have to rise because of the state of the public finances. “But to do it on January 1 is a ludicrous time. Let’s just be sensible,” he said.