Britain's recession to end: economists

Analysts expect the first estimate from the Office for National Statistics to show growth of 0.2 percent during the July-September period after five quarters of shrinking output.

“What you are likely to see is a return to marginal growth,” said Charles Davis, senior economist at the Centre for Economics and Business Research consultancy.

However he warned: “It's important not to get too carried away.”

Britain's deficit ballooned to a record high in September as the public purse buckled under the weight of a recession that began in the second quarter of 2008, according to data on Tuesday.

“The fiscal consolidation necessary to bring the public sector deficit back down to sensible, healthy levels will actually act as a major drag on growth which could send year-on-year growth down again” after 2010, Davis told AFP.

His bleak forecast comes as Britain readies for a general election due by mid-2010 and which is likely to see Prime Minister Gordon Brown's Labour government lose power to the main opposition Conservatives, according to polls.

Meanwhile Britain, like the United States, has yet to officially join other major economies France, Germany and Japan out of recession following the worst global downturn since the 1930s.

The economy shrank 0.6 percent in the second quarter compared with the first three months of the year, a slight improvement on a previous estimate of a 0.7-percent contraction.

“Two or three weeks ago we had been fairly confident that we would return to growth during the third quarter but a big spanner in the works was thrown in by the (British) industrial production figures for August which showed a 2.5 percent decline on the month,” said Investec Securities economist Philip Shaw.

“Bearing that in mind, we still believe that we'll see an expansion for the third quarter but we're less confident than we were and our prediction is very much based on the premise that the service sector expanded in the third quarter.

“Without that you won't see the plus sign in front of the (headline) number” on Friday, Shaw said.

Independent British body, the National Institute of Economic and Social Research, has even forecast a return to growth only in the fourth quarter.

“The economy is poised to resume growth in the fourth quarter and GDP will rise by 1.3 percent in 2010,” it said in a report published on Wednesday.

“But the recovery will be feeble since consumer spending, the usual mainstay of demand, will continue to fall.”

Consumer spending is down as the labor market faces its worst problems for 14 years. The number of unemployed climbed by 210,000 to 2.47 million in the three months to July — the highest level since May 1995.

The Bank of England has sought to combat the recession with record-low interest rates and a radical policy of quantitative easing — pumping new cash into the economy to help kick-start lending to businesses and individuals.

After contracting by 4.4 percent this year, Britain's economy should expand by 1.5 percent in 2010 with growth held back in part by fiscal tightening, predicted Shaw.

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