Harold Wilson was prime minister and Margaret Thatcher the newly elected leader of the opposition. Lord’s hosted the first cricket world cup final, David Bowie released Young Americans and inflation reached a post-war high of more than 25%. That was Britain in 1975, the last time the economy endured a double-dip recession.
Until now, in all likelihood. When the Office for National Statistics releases growth figures for November next Friday the data is expected to show UK on course to contract in the final three months of 2020. An economy that was already losing momentum in the early autumn was further hampered by the four-week lockdown in England that ended in early December.
Lockdown 3 – which came into force earlier this week – guarantees that the economy will beweaker still in the first three months of 2021, even if the government’s vaccination programme goes as planned and restrictions can be gradually eased from mid-February onwards.
Two successive quarters of falling gross domestic product (GDP) are needed to qualify for a recession and a double-dip involves two recessions, separated by a small gap: something now highly probable, but not inevitable.
Torsten Bell, the director of the Resolution Foundation, says it is still “technically possible that the fourth quarter of 2020 wasn’t a fall, but it probably was”.
On an annual basis, 2020 will record the biggest drop in national output since 1709. There was, of course, no ONS during the “Great Frost” of that year, but such evidence as there is suggests the 15% drop in output was a short, sharp shock. It might not technically have even been a recession by modern standards, although it would have felt like one.
Today measuring the economy is a lot more sophisticated. The ONS reports monthly GDP figures with a short lag, and during the pandemic has been providing more timely snapshots with the help of traffic usage, retail footfall and Google searches.
When the crisis began a little less than a year ago, the assumption was that the UK would go backwards in the first half of 2020 but then recover much of the lost ground by the year’s end. But the bounce in the third quarter of last year proved fleeting and the economy will end 2020 more than 10% smaller than it was in the final months of 2019.
The closest the UK has been to a double-dip recession since the mid-1970s was in the early 2010s when the ONS initially reported a second two-quarter fall in output after the arrival in power of the Conservative-Liberal Democrat coalition government but found later that the economy had performed better than initially feared.
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