Double dip fears as economy shrinks 0.5%
The economy shrank by 0.5% in the final quarter of 2010 according to shock figures from the Office for National Statistics (ONS).
Chancellor George Osborne attributed the figure in large part to the Big Chill, saying ‘we will not be blown off course by bad weather’.
However, the ONS figures indicate growth would have been almost flat regardless of the severe conditions this winter.
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The 0.5% contraction was worse than economists had predicted and some analysts warn a period of stagflation could be on the horizon – high inflation amidst economic stagnation.
The news has brought renewed questions over the government’s fiscal plans with Labour arguing the contraction is proof the coalition should reassess its policy.
‘With families and businesses already facing both rising unemployment and rising inflation, the fact that the economy is now shrinking means the Conservative-led government's claims to have saved the economy and secured the recovery will ring very hollow indeed,’ said shadow chancellor Ed Balls.
The news came less than a week after official figures put inflation at 3.7% under the Consumer Price Index (CPI).
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