Black day for Cameron

DAVID CAMERON suffered a “Black Wednesday” yesterday when Britain plunged back into recession – as an aide’s resignation put Culture Secretary Jeremy Hunt’s career in fresh peril.

The Prime Minister was rocked by figures revealing the economy shrank by 0.2 per cent between January and last month, confirming the “double-dip” downturn that ministers had long dreaded.

Labour was quick to condemn “a recession made in Downing Street”, blaming 18 months of tax rises and spending cuts for the sinking economy – after its warnings about the austerity drive were ignored.

A slide in construction output and a stagnant services sector were blamed for the slump which, after a fall of 0.3 per cent the previous quarter, has caused the UK’s first double- dip recession since the 1970s.

Experts said the first-quarter figure, which compared with City forecasts for growth of 0.1 per cent, painted an unduly pessimistic view of the economy and there was a danger that the UK’s recession tag could damage confidence and prompt firms to rein in spending at a time when growth is needed.

Labour leader Ed Miliband told the House of Commons that the figures were proof that the Government’s plan had failed, describing the downturn as “a recession made by the Prime Minister and the Chancellor in Downing Street”.

Mr Miliband said at Prime Minister’s Questions: “Over the last 18 months, since his catastrophic spending review, our economy has shrunk.

“The reality is that it is families and businesses who are paying the price for his arrogance and complacency.”

Mr Cameron responded: “These are very, very disappointing figures. I don’t seek to excuse them, I don’t seek to try to explain them away.

“Let me be absolutely clear: there is no complacency at all in this Government in dealing with what is a very tough situation which, frankly, has just got tougher.

“It is very difficult recovering from the deepest recession in living memory, accompanied as it was by a debt crisis.”

He added: “We have got to rebalance our economy. We need a bigger private sector.

We need more exports, more investment.

“This is painstaking, difficult work but we will stick to our plans, stick with low interest rates and do everything we can to boost growth, competitiveness and jobs in our country.”

Sterling fell sharply in the wake of the figures, which have opened the door to another round of money-printing measures by the Bank of England.

Its governor, Sir Mervyn King, has already warned that the economy might “zigzag”

in coming months, with diamond jubilee celebrations and the Olympics also likely to distort the figures for the second and third quarters.

The downturn is expected to be nothing like as severe as the recession of 2008-09, when the economy contracted by more than seven per cent.

The Office for National Statistics’ first estimate is compiled before more than half of the data has been gathered and some economists are hopeful that figure will be revised in coming months.

Experts at the Ernst and Young Item Club went further and said its reaction to the headline figure was “one of disbelief”, particularly after a run of strong industry surveys from the manufacturing and services sectors.

Andrew Goodwin, economic advisor, said: “The divergence between the stronger survey data and dire official output estimates is virtually unprecedented and must raise question marks over the quality of the data.”

The services sector, which accounts for three-quarters of the economy, saw growth of 0.1 per cent in the quarter after a fall of 0.1 per cent in the final quarter of last year.

Retail sales were boosted last month by panic-buying of petrol amid fears of a tanker drivers’ strike and a heatwave that encouraged people to buy summer clothes.

But the industrial production sector declined 0.4 per cent, with manufacturing down 0.1 per cent after a 0.7 per cent decline in the previous quarter. The continued fall in manufacturing will come as a blow to the Government which is hoping the sector will lead the recovery.