Triple dip recession concerns rise as bad weather hits UK economy

The UK is inching towards a triple dip recession with the bad weather threatening to tip the economy over the edge, a leading forecaster warned last night.

Official growth figures due on Friday are expected to show that the British economy shrank in the final quarter of last year.

According to many experts, there would be another fall in the three months from January to March, with the nation ending up in its third recession in five years.

Peter Spencer, chief economic adviser to the influential Ernst & Young Item Club that uses the Treasury's own models in its forecasting, said the UK was sliding towards a triple dip recession in his view.

The snow was not helping, he said, adding that when the economy was bouncing along the bottom, a bout of bad weather could easily tip it into negative territory.

Snowfall over much of the country would likely hurt the economy as wintry weather deterred shoppers from heading to the high street and also affected internet shopping because of delayed deliveries, according to Spencer.

However, construction and supply chains would be the worst affected, where companies found it hard to make up for lost ground.

He said if supply chains were hit and production lines disrupted then it could have awesome effects.

An episode of severe bad weather was definitely significant enough to turn a flat growth figure into a falling one, he said.

According to economists, a recession is two quarters in a row of negative growth.

Analysts say dismal growth numbers from the Office for National Statistics on Friday would likely add pressure on the chancellor George Osborne to drop Bank of England's inflation target in order to boost growth.

Meanwhile, the UK economy would likely have shrunk in the final three months of 2012 amid falling industrial production in the dominant services sector, economists said, sounding a warning ahead of the official data's publication this Friday.

Also, the expected rebound in the first quarter - a continuation of the economy's zig-zag pattern – could be crushed by the snow, with output sliding again, tipping the UK back into recession.

According to Berenberg Bank economist Robert Wood, erratic factors continued to plague growth figures, with the unwinding Olympics effect probably subtracting 0.3 percentage points from fourth quarter growth.

Weak extraction output as oil rigs were shut for maintenance probably took another 0.2 percentage points off, he added.

Further, BNP Paribas's Ken Wattret warned the snow could cause a triple dip recession.

With the UK entering a big freeze, he said, there was a possibility that something akin to last year's situation could happen again, with a weather-related fall in output in the first quarter, meaning the UK could enter a technical recession, albeit for erratic reasons.