Economist warns ‘don’t do too much too soon’

9:57am Saturday 6th February 2010

By Owen McAteer

A LEADING economist says there is a 20 per cent chance that Britain will fall back into recession.

Commentator Nick Parsons, head of market strategy at the National Australia Bank and UK economist for Yorkshire and Clydesdale Banks, was in the region this week to address about 100 business people at an event at the Riverside Stadium, Middlesbrough.

He gave his predictions for the economy over the next 12 months and identified opportunities and threats to help them with business planning.

There have been fears from some commentators that Britain may suffer a doubledip recession.

This was driven by the fact that the scape in the last quarter of last year, after six quarters of negative growth, was partly driven by the car scrappage scheme and people making purchases before the VAT rise.

Speaking to The Northern Echo following the Middlesbrough event, Mr Parsons said that, judging by the last two recessions, in the Eighties and Nineties, it was possible that there still may be quarters of zero or negative growth, despite the fact the economy was in recovery.

Two consecutive quarters of negative growth are needed to count as the country falling back into recession.

Mr Parsons said: “One quarter doesn’t count as a recession, but clearly there is a risk and a very real one.

“We think there is a ten to 20 per cent probability. It is not a one in 100 chance, there is a significant risk.”

But he added: “It is not our central forecast, that is that we will stay above zero and have this gradually-building recovery.”

However, Mr Parsons said businesses should not try to do too much too soon or overstretch themselves.

He said: “For people who run businesses, wouldn’t it be crazy to survive six quarters then make mistakes in the recovery.

“Wouldn’t it be a shame to lose your business in the recovery rather than recession.

Mr Parsons said that for the North-East there was “one big opportunity and one big threat”.

He said: “The one big opporunity comes from manufacturing exports – the pound has fallen 30 per cent.

“We have had an increase in public spending of three and a quarter per cent and that can’t continue.

“The North-East has been a major beneficiary of that increase in Government spending and public sector employment and that is going to tail off.”