UK heading for recession? Don't panic it's not 2008, say Skandia |
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| Economy | |
| Written by Gary Howes | |
| Thursday, 26 January 2012 | |
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"We do not think that the UK economy is about to slide back into a deep recession."
After the news that the UK economy shrank by 0.2% in the previous quarter our own commentator Richard Northedge wrote that the UK is now in recession, saying we should not bother waiting for the second quarterly decline to confirm the matter from a technical viewpoint. This morning Skandia Investment Group have suggested that while things are bad, we are not headed back to a similar scenario to that of 2008/2009. Rupert Watson, Head of Asset Allocation, Skandia Investment Group writes: "While the economy is clearly weak we do not think that the UK economy is about to slide back into a deep recession. There have been a number of recent developments that point in the direction of positive growth at the start of 2012. "First, surveys of business confidence have risen and are consistent with modest positive growth. Second, inflation is likely to fall further with the recent cuts in some energy bills likely to help. Finally there have been signs of an improvement in the eurozone, US and China which should help exports and overall confidence. "Although we expect a return to growth this year, the recovery is unlikely to be robust for some time. However, after a very weak first half of the year, we expect a stronger second half and 2013. Many investors are downbeat on the outlook for the UK economy. We think that the economy could outperform those expectations, especially if there are further signs of stabilisation in the eurozone. "In the GDP report, the UK was reported to have contracted by 0.2% in 2011Q4, weaker than expected. Construction and industrial production were especially weak, although service sector outlook was also flat. Construction and industrial production tend to be very volatile and some payback from the weakness at the end of last year is possible."
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