The economy shrank by 0.03% during the last quarter of 2012 despite shares in the FTSE 100 edging towards a four and a half year high, according to figures released today by the Office for National Statistics.
The figures do not come as a shock, however, as the Office for Budget Responsibility (OBR) correctly forecasted the results following strong growth in the third quarter of last year.
Speaking today on the BBC’s Daily Politics show, the Chief Secretary of the Treasury, Danny Alexander said the figures are a reminder of the severity, challenges and difficulties we face as a country, but highlighted crucial positive indicators that many property analysts and economists believe will lead to a brighter 2013 from the latter part of the year.
In November 2012, the European Commission correctly forecast GDP contraction of -0.3%, saying it will expand by 0.9% in 2013, making it the fastest growing of Europe’s ‘big five’ economies.
Representatives in Brussels commented: “The outlook for growth remains very weak in the short term with the main risks to the macroeconomic forecast stemming from weaker-than-expected consumption and investment, and increased turmoil in the euro area.”
Senior analysts based at Deloitte, the UK-based financial services company also forecast a similar trend in property markets, saying the downward spiral of commercial property prices would bottom out early this year, with the latter marked by a promising recovery.
The initial figures released in forthcoming quarterly reports would not reflect the continual investment from overseas markets, which is fuelling growth in commercial property markets.
Daily Politics presenter, Andrew Neil challenged Mr Alexander on the disappointing figures and stagnant GDP growth since taking office, to which he replied, “Our economy is recovering from the deepest recession, the worst financial crisis of many decades, since the second world war, or what some would even argue before that.”
“We’re doing so in a world environment where the Eurozone is going through real difficulties; that’s our major export market, that is slowing the economy down, where the impact of the banking crisis is deeper than we thought.”
He continued his breakdown of the figures saying the impact of the banking crisis on the economy is deeper than what we thought but is slowly being balanced out, where the deficit has been steadily falling by a quarter for the first two and half years.
Over a million jobs were created during 2012, the highest number in the private sector and British economy since 1989, indicating green shoots from the otherwise barren economic landscape.
Mr Alexander pointed to government polices designed to make the British economy more competitive in the medium term, noting guarantees for infrastructure, extra capital spending on transport and broadband networks, and investment in apprenticeships as prominent examples a contribution towards economic recovery.