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The UK could be facing a double dip recession if the economy is hit by a ‘further shock or loss of confidence’, the Office of National Statistics (ONS) has warned.
In its monthly Economic and Labour Market Review the ONS said that despite talk of growth the UK’s recovery is ‘fragile’. UK output has already fallen 5.5% between the second quarter of 2008 and Q2 this year and the Organization for Economic Co-operation and Development expects growth to be flat in 2010.
The ONS predicted domestic expenditure would remain weak as ‘households and firms undergo a period of de-leveraging’ which would limit growth along with unemployment and strict lending criteria.
Other factors that could push the UK into a double dip recession include ‘a retrenchment in fiscal policy as the government tackles the growing budget deficit’.
The report said: ‘Unemployment is also expected to rise further as firms are reluctant to start recruiting again until they are sure a sustained recovery is underway.
‘And while the financial sector continues to rebuild its balance sheets a cautious approach o lending is likely to be adopted. Therefore even if the UK economy manages to escape from recession in a technical sense a recovery may be fragile, and the economy is in danger of a double dip recession should it be hit by a further shock or loss of confidence.’