Posted by: acudworth | January 31, 2010

Heading For A Double Dip?

Britain has been one of, if not the hardest, hit country by the recession.  Figures released last week showed our economy grew by 0.1% in the 3rd quarter bringing us officially out of recession, but as confidence begins to return are we really out of the woods?

Well, a survey of Business leaders by PricewaterhouseCoopers puts a damper on the initial optimistic mood.

While the prevailing view from UK businesses is that the economy is nearing or has already reached the bottom of the recession, fear of a W-shaped or ‘double dip’ recession remains high.

According to PwC the main areas of concern are:

  • political instability a key concern
  • lacklustre business confidence
  • niche businesses a hit in the North
  • construction and engineering hardest hit sectors
  • tax rises stifling entrepreneurship

The risk of a double dip has been around since the start of the recession, now with an ever increasing budget deficit of over £180 billion (and forecast to reach £200 billion) the likelihood seems greater and greater as each day goes by. If we do not curb our expenditure quickly we could risk our credit rating being downgraded from the current AAA rating we have, and coupled with a huge budget deficit, make us slip back into recession. On the other hand if we start repaying large amounts of debt too quickly it can also hamper the recovery. It is a tough balance to get right, leading to the uncertainty in analysts forecasting our future economic position.