UK economy still at risk of double-dip recession

The UK economy may have emerged from recession, but there is still a risk of a double-dip, according to KPMG.

Figures from the Office of National Statistics (ONS) show the economy grew by 0.1% in Q4 2009, after previously shrinking for six successive quarters.

Andrew Smith, chief economist at KPMG, said despite today’s positive figures, there is still a risk of a further downturn, saying: “The data confirm that the recession is technically over – just – but they also confirm that the economy is 6% smaller than it was eighteen months ago.

“It looks like being a slow haul out of recession. The first quarter of 2010 could be touch and go as VAT goes back up and consumers look to the coming election and fiscal squeeze. At this rate we risk a double dip recession before the recovery has even got going.”

He added it was too early to look for improvement in the labour market.

“The good news in the recession was that job losses were contained by flexible working arrangements. The bad news in the recovery will be that job creation will lag as existing employees return to more normal working arrangements before businesses need to hire.”

Further reading: End of the recession? Companies and lenders paddling but no diving!