Statistically, the UK is out of recession – but it took an Olympian effort to achieve even this fragile upturn.
This is not the end. It is not even the beginning of the end but it is, perhaps, the end of the beginning. It was with those words, delivered almost 70 years ago to the day, that Winston Churchill greeted news of Montgomery’s victory at El Alamein, a turning point in the Second World War, Micron Associates reviewed. The Conservative party can never get too much of Churchill, so there will be many in the blue half of the coalition who will be hoping that the words are as appropriate for describing the state of the economy today as they were for outlining the global balance of power in late 1942.
Make no mistake, news that Britain’s economy grew by 1% in the third quarter of 2012 does not mark the end of the downturn that began more than five years ago, even though it is tremendous morale booster for a government that has had its back to the wall in recent months. The Treasury and the Bank of England know the performance of the economy was flattered by one-off factors in the period between July and September, resulting in growth figures that are less good than they look. Over the past 12 months, national output has been flat and remains 3% lower than it was in early 2008. Recovery has been weaker and slower than in any cycle for which reliable records exist, including the Great Depression of the 1930s.
It will take another year of robust growth simply to return the economy to where it was during the period of phony war between the run on Northern Rock in September 2007 and the collapse of Lehman Brothers a year earlier, and a decade to make up even half the output lost over the past four and a half years. The level of gross domestic product is 13-14% below where it would have been had growth continued at its pre-recession trend of 2.5% a year. Some of that has been lost for good: it will never be recovered.