News Corners

GDP figures for the last three months of 2011 are to be released today amid fears the economy may now be contracting.

If the official figures do reveal the economy has shrunk, it will mean that Britain could be heading towards a double dip recession.

In the first nine months of last year, GDP grew by just 1.1%. The third quarter saw an expansion of 0.6% but continuing eurozone problems have hampered further growth.

The figures are to come 24 hours after revelations that UK debt is equal to 64.2% of the current GDP – surpassing the £1trillion barrier for the first time.

Negative growth figures will force the Government to again defend their tough austerity measures and they are likely to come under fresh attack from Labour.

The Ernst and Young Item Club recently said that the UK was in a “state of paralysis” and many city forecasters would agree.

There is hope however that positive retail figures from the festive period might have stemmed the decline.

Long Christmas sales persuaded shoppers to spend money and many companies reported a year on year rise in like-for-like sales.

High inflation throughout 2011 curbed general spending as wages failed to keep up, and unemployment has continued to rise.

A fall of GDP could persuade the Bank of England to extend its most recent round of Quantative Easing when it meets next month.

Forecasters have been forced to repeatedly slash their growth predictions as the eurozone crisis continues.

The most recent forecast for 2012 by the independent Office for Budget Responsibility, set up by the current government, is for 0.7% and the IMF is now predicting 0.6%.

It is therefore set to be a slow year for the British economy and some analysts now fear the UK could be in a lost decade of growth.

Sir Mervyn King, the Governor of the Bank of England, admitted on Tuesday night that the road to recovery was likely to be arduous, long and uneven.

But he insisted there was “no reasons to despair”, adding: “Helped by the right policy actions, the UK and world economies can and will recover.

“And when they do so, they will be on a more sustainable footing than at any point in the past fifteen years.”

Sir Mervyn also launched his strongest attack yet on bankers’ bonuses, describing a “small elite” who get disproportionately high rewards and singling out benefits given to those working at banks propped up by the taxpayer.

He said: “Those taking decisions on remuneration, in the financial sector and elsewhere, need to understand that a market economy rests not just on incentives, but on the acceptance that the distribution of rewards is fair.”