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UK recession 'worst since 1930s' UK recession 'worst since 1930s'
(about 6 hours later)
The UK recession could be the worst since the early 1930s, a leading economic research body has predicted.The UK recession could be the worst since the early 1930s, a leading economic research body has predicted.
The National Institute of Economic and Social Research (NIESR) said in 2009 the country's GDP could contract by 4.3%, and then grow in 2010 by 0.9%.The National Institute of Economic and Social Research (NIESR) said in 2009 the country's GDP could contract by 4.3%, and then grow in 2010 by 0.9%.
"There is a real possibility that GDP will fall more this year than in 1931," said the NIESR in its economic review."There is a real possibility that GDP will fall more this year than in 1931," said the NIESR in its economic review.
But the Nationwide Building Society said UK consumer confidence saw its biggest rise in two years last month.But the Nationwide Building Society said UK consumer confidence saw its biggest rise in two years last month.
The Nationwide index rose to 50 in April, up from 42 in March - the most marked improvement since May 2007.The Nationwide index rose to 50 in April, up from 42 in March - the most marked improvement since May 2007.
'Feeble recovery''Feeble recovery'
The UK government has predicted the economy will shrink by 3.5% this year, and then grow by 1.25% in 2010.The UK government has predicted the economy will shrink by 3.5% this year, and then grow by 1.25% in 2010.
However the International Monetary Fund, in its latest economic forecast, has suggested that the UK economy will decline by 4.1% this year and then decline again by 0.4% next year. However the International Monetary Fund, in its latest economic forecast, has suggested that the UK economy will contract by 4.1% this year and then shrink again by 0.4% next year.
In its report the NIESR says: "The pace of decline to date shows a remarkable resemblance to that of the depression of the early 1930s, though that similarity should be broken as a feeble recovery gets under way in the final quarter of this year."In its report the NIESR says: "The pace of decline to date shows a remarkable resemblance to that of the depression of the early 1930s, though that similarity should be broken as a feeble recovery gets under way in the final quarter of this year."
The institute thinks the chancellor's being optimistic about the strength of the recovery Stephanie FlandersBBC economics editor Read Stephanie's blog
It says that the economy will manage to pick up to a 2.3% growth rate in 2011.It says that the economy will manage to pick up to a 2.3% growth rate in 2011.
The economic body also forecasts that "unemployment will carry on rising to a peak of 3.1m people - 9.6% of the labour force in 2011".The economic body also forecasts that "unemployment will carry on rising to a peak of 3.1m people - 9.6% of the labour force in 2011".
And it warns that the outlook for the public finances during the recovery would be even worse than the chancellor set out in the recent Budget.And it warns that the outlook for the public finances during the recovery would be even worse than the chancellor set out in the recent Budget.
It said that was because GDP would rise by less than Alastair Darling expects "as both real growth and inflation turn out to be lower".It said that was because GDP would rise by less than Alastair Darling expects "as both real growth and inflation turn out to be lower".
'Carnage''Carnage'
The institute thinks the chancellor's being optimistic about the strength of the recovery Stephanie FlandersBBC economics editor Read Stephanie's blog
BBC economics editor Stephanie Flanders said Chancellor Alistair Darling would not relish the historical comparison.BBC economics editor Stephanie Flanders said Chancellor Alistair Darling would not relish the historical comparison.
But she added: "Where the UK is concerned, the year you really don't want to replicate is 1921, when the economy shrank by nearly 10%.But she added: "Where the UK is concerned, the year you really don't want to replicate is 1921, when the economy shrank by nearly 10%.
"Thankfully the NIESR doesn't think we're approaching that territory right now. Although you might imagine so, given the carnage afflicting the public finances."Thankfully the NIESR doesn't think we're approaching that territory right now. Although you might imagine so, given the carnage afflicting the public finances.
"Like many others, the institute thinks the chancellor's being optimistic about the strength of the recovery from 2010.""Like many others, the institute thinks the chancellor's being optimistic about the strength of the recovery from 2010."
But the NIESR's gloomy prognosis was countered by the Nationwide figures, which indicated a steep jump in the proportion of people who felt upbeat about how the economy and labour market would be performing in six months' time.But the NIESR's gloomy prognosis was countered by the Nationwide figures, which indicated a steep jump in the proportion of people who felt upbeat about how the economy and labour market would be performing in six months' time.
Around 26% of people think the economy will have improved in six months, up from 19% in March, while only 32% think it will be worse, down from 41% a month ago.Around 26% of people think the economy will have improved in six months, up from 19% in March, while only 32% think it will be worse, down from 41% a month ago.
Senior economist Martin Gahbauer said: "In recent weeks, we have seen a strong rebound in global equity markets and some tentative signs of improvement in housing market indicators, both of which may have contributed to the marked upturn in consumer confidence during April."Senior economist Martin Gahbauer said: "In recent weeks, we have seen a strong rebound in global equity markets and some tentative signs of improvement in housing market indicators, both of which may have contributed to the marked upturn in consumer confidence during April."