Alistair Darling says North can lead recovery

Oct 24 2009 by Amy Hunt, The Journal

CHANCELLOR Alistair Darling predicted yesterday that the North East will help lead the country out of recession as it was revealed the UK is in the deepest downturn since the 1950s.

As he visited the headquarters of Northern Rock to meet staff at the nationalised bank, Mr Darling insisted he was “confident but cautious” that the economy would grow again by the end of the year, following six quarters of decline.

And he said innovations, like work going on the region to develop technology and infrastructure for electric vehicles, would see the North East well positioned to emerge from recession.

Hopes that the country would begin to see growth after a year-and-a-half of recession were dashed by figures which showed we are now in the grip of the longest period of continuous decline since Office for National Statistics records began in 1955.

The economy shrank by 0.4% between July and September and output has now slumped 5.9% since the onset of recession, almost as bad as the 6% slump seen in the early 1980s.

The announcement sees the UK still lagging behind other major economies such as France and Germany, which both emerged from recession earlier in the year.

The Chancellor said: “Two years ago I said this downturn would be more severe than many people thought and I have said I did not expect to see us return to positive growth until the end of the year.

“We have had one of the deepest downturns we have seen in generations and it’s not surprising it takes time to come out of that. I’m confident we will see a recovery, but I’m cautious because there’s a long way to go yet.

“Like every other part of the country the North East is being affected by the recession. But I think the North East has a very good future, provided the Government continues to do what it can to help the country through the recession.”

At Northern Rock, Mr Darling met and paid tribute to staff he said had helped save the bank.

The European Commission looks set to give the green light next week to a plan to split the Rock into two, with one bank offering savings and mortgages and a separate asset management company which will hold the Rock’s more “toxic” loans. The mortgage bank is then expected to be sold off – probably after next year’s election.

Mr Darling said: “Two years ago it looked like Northern Rock had come to an end and I think it’s a real tribute to staff here that they are holding everything together and that we’re now in a situation where we can see a future for Northern Rock.

“I have to pay tribute to these people who, at times, must have wondered whether they would have a job next month. I think staff can look back with some satisfaction at what they did.

“It has been a very difficult time for the staff and a difficult time for the North East.

“We took a lot of stick when we intervened [to nationalise the bank]. People said it was the wrong thing to do, to nationalise Northern Rock, but the fact we’re here in this building today emphasises the point that we were right to do so.

“I hope we will get approval from the EU very shortly. We can’t wait until next year, we need to get on with it. We cannot afford to repeat the mistakes made under the previous management.”

Northern Rock chief executive Gary Hoffman said: “It was good for the Chancellor to see first hand the progress we have made at Northern Rock – we have come a long way under the new management team.

“The Chancellor was able to meet some of the people who were around in 2007 and are an important part of the future at Northern Rock. We have made good progress and are looking forwards not backwards.”

Yesterday, the Chancellor faced further criticism over the economy and the news that the recession was still ongoing.

Shadow chancellor George Osborne said: “This news has destroyed Labour’s claim that Britain was better placed than other countries to weather the storms.”

Liberal Democrat treasury spokesman Vince Cable said the economy still faced “massive structural problems, saying: “It is critical ministers spell out a credible path as to how they will deal with the deficit.”