UK back in recession, warns think tank

By Neal Wallace

A leading think tank has warned that the UK may have already slipped back into recession.

Economic forecaster the Item Club has said that gross domestic product shrank in the final quarter of 2011, and is likely to further contract during the current three-month period.

It is also predicted that unemployment will rise by a further 300,000 to just below three million people, while even a resolution to the eurozone crisis will only see the UK economy grow by 0.2 per cent in 2012.

Speaking to the BBC, Item Club's chief economic adviser Peter Spencer said that problems in Europe are causing trade to fall, as Europe takes the majority of the UK's exports.

"Consumption was very badly hit by rising inflation last year, business spending has been paralysed, and of course recruitment has also gone on hold as a result of the euro crisis," he added.

It was reported earlier this month that the UK's manufacturing sector had declined less than expected in December.