Britain may avoid a recession: economist

Jul 26 2008 by Alex Turner, Liverpool Daily Post

Britain may avoid a recession: economist

A LEADING Liverpool economist believes that the UK will avoid a recession despite official figures published yesterday showing that the country’s economic growth has slumped to just 0.2%.

Between April and June the economy grew at its slowest pace since the beginning of 2005, according to Office of National Statistics estimates.

A recession, defined as two consecutive quarters of negative growth, is now expected to happen in the coming few months, according to some City analysts.

However Peter Stoney, an honorary senior fellow in economics at the University of Liverpool and part of the Liverpool Macroeconomics Forecasting Group, argued that the underlying trend is not as bad as it appears.

Speaking during an interview for tomorrow’s LDP Business Week radio show, Mr Stoney said: “We would expect a dip of this kind in the second quarter in view of the credit crunch.

“We think it is a temporary blip. We need to look at the global picture which is quite a lot more optimistic. Despite the slow second quarter, we are still forecasting growth.”

The radio show, presented by Daily Post business editor Bill Gleeson, is broadcast on talk radio station CityTalk105.9fm.

Despite Mr Stoney’s optimism, the Bank of England is unlikely to come to the rescue with rate cuts in the near future because surging fuel and food prices have pushed inflation to almost double its 2% target.

One member of its Monetary Policy Committee even voted to hike rates in July to send out a hard-line message on the need to control prices.

The fall in the pace of growth, which was in line with City forecasts, underlined the impact of the credit crunch on a struggling housing market.

Construction output fell by 0.7% due to a “particularly large” fall in new housebuilding during the second quarter, the ONS said.

LDP Business Week also hears from Vauxhall about plans to build an electric car at its Ellesmere Port factory.

Tune in to LDP Business Week on CityTalk 105.9 tomorrow from 11am to hear the full interview with Peter Stoney.

alex.turner