Triple-dip recession threat due to snow

Britain could be facing an unprecedented triple-dip recession as a result of the recent cold snap, economists have warned.

Official figures due out on Friday are expected to show that the economy shrank by up to 0.3% in the fourth and final quarter of 2012 as a result of sluggish performance in the retail, services and construction sectors over the festive period.

And fears are growing that the recent cold snap, which has caused significant disruption, could result in a second consecutive quarter of negative growth.

Workers and shoppers stay home

Insurers RSA estimate that the snow and freezing weather costs the economy £473 million a day. This is because many workers are unable to make it into the office and shoppers choose to remain at home rather than go out and spend money.

“It’s a very challenging time for retailers anyway at the moment so anything like this which deters shoppers further doesn’t really help matters,” the British Retail Consortium said in a statement.

Given that some are expecting the icy conditions to last until February, it’s clear this would have a significant impact on our economic growth – it was estimated that the heavy snow we saw two years ago caused the economy to shrink by 0.5%.

Peter Spencer, chief economic adviser to Ernst & Young Item Club, said: “We are sliding towards a triple dip recession in my view.

“The snow is not helping. When the economy is bouncing along the bottom anyway, a bout of bad weather can easily tip it into negative territory.”

By no means definite

It’s worth stressing that a triple-dip recession is by no means a certainty. For starters, it’s possible the economy didn’t contract at all in Q4 of 2012.

The most bullish forecasters claim that the economy remained unchanged during that period, with strong performance from the construction sector helping to counter the weak performance in other sectors.

And while that might not sound particularly encouraging, it would mean that the economy could shrink in the first quarter of 2013 as a result of the freak weather and we would not officially slip into a recession.

So this Friday’s GDP figures really are key for the government, as any contraction would seemingly mean we’re headed for a third recession in five years. And that would lead to a number of uncomfortable questions being asked of George Osborne and his plans to cut the deficit.