'Recovery policies need time to work'

Huddersfield Daily Examiner (Huddersfield, England), Jan 24, 2009

Byline: By HENRYK ZIENTEK Business Reporter

CHANCELLOR Alistair Darling has urged people to give his economic policies time to work- as it was confirmed the UK is officially in recession.

Mr Darling warned that it would take time for Government policies, including this week's multi-billion pound second banking sector bailout, to take effect.

He said measures such as the tax cuts announced last autumn and bringing forward constructions projects were important to help the UK get through the recovery.

But he warned: "Some of these things will take time to feed their way through the economy."

Official figures showed the economy shrank by 1.5% in the fourth quarter of 2008 - the biggest fall in more than 28 years and the second consecutive quarter of negative growth.

The FTSE 100 Index fell below the 4000 barrier yesterday after the worse-than-expected figures. The Footsie was last below the 4000 mark in mid-November.

It recovered slightly to close at 4052.4.

The gloomy news also caused sterling to set another near 24-year low against the dollar, falling more than 2% to 1.35.

City experts are predicting falling output for all four quarters of this year, causing the UK economy to contract by around 3% in 2009 overall - the biggest drop since the Second World War.

Andrew Palmer, CBI regional director for Yorkshire and the Humber, said: "These numbers are much worse than expected and this is the sharpest contraction in the economy since 1980.

"The intensity and speed of falling demand combined with the global credit crunch mean this recession is going to be more painful than the early nineties, and sadly one consequence of this will be much higher unemployment.

"Looking ahead, we hope the impact of interest rate cuts, falling inflation, the fiscal stimulus and the Government's recent measures to kick-start lending will have a stabilising effect later this year."

Vicky Redwood, of Capital Economics, said the latest figures set a very weak starting point for output this year.

She said: "We had already expected GDP to shrink by 2.5% this year, but the contraction now looks set to be closer to 3%.

"With the UK economy now officially deep in recession, we continue to expect interest rates to be cut to zero or thereabouts within the next two or three months."

CAPTION(S):

PLEA: Chancellor Alistair Darling appealed for patience