Michael Quach considers the state of the UK economy and
questions the future of the Chancellor's austerity
drive.
The UK economy slipped back into a technical recession in the
latter part of 2011. Real gross domestic product contracted by a
further 0.3% in the first quarter of this year following a 0.2%
decline in the fourth quarter of 2011. This left the level of
output some 4% below its 2008 recession peak.
The main drags on the domestic economy continue to be the
ongoing severe squeeze on real household incomes, deleveraging in
the private sector and exposures to events in the euro area. The
impact on the UK of problems on the continent are from reduced
trade, increased bank funding costs as the crisis has intensified
and a fall in private sector confidence. It will take time for the
financial sector and credit conditions to normalise.
