Guardian UK: Britain teeters on brink of recession as companies cut back

[marmar]

Economy: Britain teeters on brink of recession as companies cut back
Kathryn Hopkins and David Gow
The Guardian, Tuesday July 8, 2008


The UK is in serious danger of heading into recession as the credit crunch tightens its hold on the economy, according to a survey of businesses across the country published today. An increase in the number of firms reporting fewer orders, more job cuts and less investment is the latest indication that the British economy is suffering from the effects of the global credit crunch and the steep rise in the price of fuel, food and other raw materials.

Firms in the service sector have seen "alarming" declines in the past three months, with those reporting lower orders outnumbering those recording rises for the first time since 1990, the British Chambers of Commerce's latest quarterly economic survey of 5,000 companies says.

It adds that if these trends continue, the business sector is only three months away from technical recession.

Government figures yesterday showed that manufacturing production in May dropped unexpectedly by 0.5% from the previous month, and was down by 0.8% on this time last year. The wider measure of industrial production, which includes output from utilities and mining, also posted a decline of 0.8% in May.

David Frost, head of the British Chambers of Commerce, said: "These results show a real risk of recession in the coming months. This is deeply worrying, not just for business, but for the consumer too, with both manufacturing and services reporting negative results. The temptation for the government will be to raise business taxes in the next pre-budget report because the exchequer is running out of money. This would be a catastrophe."

Opposition parties used the survey to claim that the government had failed to deal with the impact of the credit crunch. The shadow chief secretary to the Treasury, Philip Hammond, said: "This survey will only add to British businesses' concerns about the economy. Instead of being supported in these difficult times, they are facing more tax hikes because Gordon Brown failed to fix the roof while the sun was shining." .......(more)

The complete piece is at: http://www.guardian.co.uk/business/2008/jul/08/economicgrowth.economics