UK Economy Still In Depression – OpEd

By Sergei Sayenko

In the first quarter of 2012, the UK GDP decreased by 0.2%.

This was announced by the UK Office for National Statistics on Wednesday.

For comparison: in the last 3 months of 2011, the UK GDP decreased by 0.3%.

If the GDP continues to fall over the next 6 months, one can speak of a serious recession in the UK economy. The last time that a similar situation took place in the UK was in the 1970s.

Some time ago, several UK analysts predicted an increase of the country’s GDP by 0.1% – but it has turned out that they were too optimistic. Instead of an increase, the GDP has fallen again. Now it makes only 0.6%.

One of the main reasons for this is that house building has considerably decreased in the UK. Namely, it decreased by 3% if compared with the last quarter of 2011. This is the worst index in the last 3 years. Besides, the industrial production in the UK decreased by 0.4% within the same period.

The global economic and financial crisis affected, and is continuing to affect, the UK as well. At present, the country’s GDP is lower by 4.3% than it used to be before the crisis. Experts say that the main things that are hampering the UK’s economic development at present are increasing prices for energy materials, the current economic policy of David Cameron’s cabinet, aimed at cutting budget expenditures, and a very slow increase of salaries and wages.

Now, even the formerly optimistic analysts are expecting a further decline of the UK economy in the second quarter of 2012. The UK’s main trade partner – the Eurozone – is also living through an economic recession, and this, of course, cannot but affect the UK economy. Besides, expenditures on the celebration of 60 years since the coronation of Queen Elizabeth II, which is planned for July, may also affect the UK economy.

It may be expected that now, when the Office for National Statistics announced this data, the UK public will start to put more pressure on the government and on the Central Bank, demanding that they should undertake more attempts to improve the situation.

In May, the UK Central Bank will hold a meeting, and it will most likely have to look for ways to find more money to stimulate the country’s depressed economy.

At the same time, the UK government does not intend to reduce the budget cuts. This is what Prime Minister David Cameron said on Wednesday in the UK parliament. The prime minister had to admit that the news about the country’s constantly decreasing GDP is “very disappointing”.

The UK opposition, however, claims that Mr. Cameron chose a very mild wording when he called the situation in the country’s economy “very disappointing”. The opposition prefers much sharper words to characterize it. For example, the leader of the Labor Party Ed Miliband calls the situation in the UK economy “catastrophic”, adding that one should “thank” the policy of Mr. Cameron and of the Minister of Finance George Osborne for this catastrophe.

But Mr. Cameron does not seem to make any concessions to his critics. He keeps on saying that the government will continue the policy of budget cuts.

The UK public is, of course, not happy about that. Several rallies against the policy of budget cuts have already taken place in the UK.

In the spring and the summer of 2011, many thousands of Brits took to the streets, protesting against the budget cuts.

Now, the country’s trade union leaders promise a series of strikes of workers of the public sector in May and June. Well, let us wait and see whether the UK government will manage to ignore the people’s disappointment this time.