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Fears of a Triple Dip Recession

We’re all more than familiar with the double dip recession, but will the economy go one further with a triple dip? The coalition government were today playing down Vince Cable’s warnings that Britain could be facing a triple dip recession. In an interview on Sunday, he warned that the UK falling into recession for the third time since 2008 was ‘certainly’ and ‘clearly’ a risk. However, he commented the most likely scenario was that the economy would continue ‘bumping along the bottom’ – this is broadly what is forecast in the near future.

There are of course some backtracking and reassurances coming from Number 10 – Danny Alexander, Lib Dem number two at the treasury, has come out and said the forecasts would suggest we’re not going to be having a triple dip recession, despite the uncertainties that surround such economic forecasts. There are also those who say that a ‘technical’ dip into recession – that is recording two quarters of negative growth – is often just an academic difference to low growth. There could only be fractions of a percentage in it.

However, could Cable be signalling deeper concern about the overly optimistic forecasts? As Mark Littlewood, director general of the Institute of Economic Affairs comments; “The OBR now say that the UK economy will grow by 11.5% from 2013 to 2018. However, if they are as over-optimistic about this time period as they were about this year, the economy will actually shrink by 4% between 2013 and 2018.” This could create serious headaches for the government if the figures are seen as over-the-top; tax revenues will be lower and welfare bills higher than they’re banking on, and we could even see the deficit grow.

There are also concerns over interest rates, something very relevant to small businesses. Whether or not we go into a triple dip recession could be a technicality, but the impact it could have on lending and business confidence could be very real.

 

 

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