Economy lurches towards recession

Interest rates were held at 5% for the fifth consecutive month, following the Bank of England’s Monetary Policy Committee meeting in early September.

TUC head of economics and social affairs Adam Lent said the decision was “depressing” and with “recession on the cards, inflation is not the main threat to the economy”.

The recent figures on the economy are not good — growth, as measured by gross domestic product (GDP), ground to a halt between April and June, according to the latest official figures from the Office for National Statistics. Construction was particularly hard hit with a 1.1% fall in output, while manufacturing output was down by 0.8%.

The figures mean an end to the run of more than 15 years of consecutive growth.

And there could be worse to come. The Organisation for Economic Cooperation and Development, the Paris-based economic think tank, has said that the economy will contract in the third and the final quarters of this year — meeting the technical definition of a recession.

However, a more optimistic note was sounded by David Miles, the chief economist at City firm Morgan Stanley. Miles — a favourite of Gordon Brown — said many surveys may be overstating the scale of the downturn and the UK would face “negligible” rather than “sustained negative growth” of 1.1% this year.