Data released today has revealed a shocking 0.5 percent decline in UK’s economic growth in the last quarter of 2010, sparking fears of a double-dip recession.
Following four straight quarters of economic growth, today’s figures have come as a huge surprise to economists who had forecast a growth rate of up to 0.6 percent.
The government has highlighted the severe weather during October and December as the reason for the contraction, citing extensive weather related losses in the retail, transport and construction industries.
However, experts have stated that whilst the weather can be considered a factor, the coalition’s spending cuts may also have proved too much for the UK’s increasingly fragile economy.
The UK has seen a 0.5 percent drop in the key services sector as a result of spending cuts, which contributes to more than 75 percent for the economy.
Howard Archer, European and UK economist for IHS Global Insight branded the data as, “a performance far worse than even the most pessimistic of forecasts.”
“This weakness cannot be put down only to the weather,” he claimed, “It reinforces already serious concern over the economy's ability to grow significantly in the face of the spending cuts and tax hikes that will increasingly bite as 2011 progresses.'
The poor growth rate will now prevent an imminent rate rise, according to analysts, despite the need to offset rising levels of inflation.