As many predicted the highly contractionary budget of the coalition government would in fact cause a contraction of the UK economy. The revised numbers indicate that the UK economy contracted by 0.6 percent in the last quarter of 2010. Which is pretty stunning as the bulk of the cuts have yet to come down. Indeed government spending was up 0.7%.
First quarter 2011 numbers will therefore be crucial as two consecutive quarters of negative growth will indicate a recession. The likely timing of government cuts will almost guarantee negative growth in QII 2011.