Right, we are in a recession – now let's get out of it

Jan 24 2009 By Adrian Pearson, The Journal

NORTH East business leaders spoke last night of the "unsurprising reality" of working during a downturn as dire figures confirmed that the UK is now in the grip of a recession.

The UK economy contracted by 1.5% in the final three months of 2008 – worse than expected by analysts and sparking fears of a deep and prolonged recession.

Output has not fallen so badly for more than 28 years, with the economy last suffering a bigger plunge in the second quarter of 1980 when the UK was battling soaring unemployment and inflation at the start of the Thatcher era.

The most recent North East wealth-per-head statistics showed the region was falling further away from the national average even before the recession started.

Economic experts at the Centre for Economic and Business Research last night said the figures were the "final nail in the coffin for Prime Minster Gordon Brown’s claim to have ended boom and bust".

But despite the rising unemployment rate business leaders insist there are still measures the Government could to take to ease the downturn.

Ross Smith, head of policy at the North East Chamber of Commerce, said: "The announcement will come as no great surprise to anyone who has spoken to businesses over the last few months.

"We know how challenging the situation is but the important point now is not to over-analyse and worry over the figures and instead look at what can be done to help ease these effects. Making sure banks are in a position to lend would have a big impact and the Government has taken steps to do that and we’re watching to see if this helps companies.

"Another easy win would be to invest in the North East infrastructure. This is something we have needed since before the downturn."

Alan Clarke, chief executive of regional development agency One North East, said that although the announcement was expected, it was "bad news nonetheless".

He added: "This year will present the North East economy with significant challenges. But the breadth and diversity of our business base means that we are better placed than in previous economic downturns to emerge from this situation in better shape to take advantage of the opportunities that will return."

Last night Alan Duncan, the Conservative’s Tyneside spokesman and former shadow business minister, said there was nothing surprising in the announcement.

He said: "We now know for certain what I have been saying for months, we are in a deep recession and Gordon Brown is to blame for this."

But the Prime Minister said the Government was fighting the recession with "every weapon at our disposal".

He added: "We’re dealing actually with a global financial crisis with a determination and confidence about how we can get through it."

Business body the CBI warned the recession was set to be worse than that of the 1990s. Deputy director-general John Cridland said: "The intensity and speed of falling demand combined with the global credit crunch mean this recession is going to be more painful than the early 1990s and one consequence of this will be higher unemployment."

Page 2: Hopes and fears for a dramatic year