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Winter freeze just one factor behind slump leaving economy on brink of ‘double dip’ recession, says business group

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The Forum of Private Business is reacting to today's shock GDP figures showing the economy shrank by 0.5% in the final three months of 2010 following four successive quarters of growth.

The Government has blamed the bad winter weather for the slump but the Office for National Statistics (ONS) said that even with the impact of the snow and ice excluded from its latest figures, economic activity would still have been ‘flattish'.

The Forum is arguing that slow movement on policies to improve business finance – including addressing the lack of affordable lending from banks and tackling the £24 billion in late payments owed to small firms across the UK – are the real reasons the economy is facing a ‘double dip' recession, which is defined as two successive quarters of contraction.

In addition, the Forum believes tax rises such as increased duty on fuel, which is set to go up again in April by 1p, and VAT are hitting both businesses and consumers in the pocket.

"Following the mini economic revival we have experienced recently, these figures might be seen as surprising, but small businesses have warned for some time that we are far from being out of the woods," said the Forum's Senior Policy Adviser Alex Jackman.

"Clearly, the harsh winter weather, costing the economy an estimated £230 million per day at its worst, has been one factor but still not enough has been done to remove the shackles created by tax, red tape and the continued lack of affordable funding preventing SMEs from growing, creating jobs lost in the public sector and driving real, sustained economic recovery."

Mr Jackman warned: "Unless that changes, and changes quickly, there remains a very real threat of a ‘double dip' recession and that could spell disaster."

The Forum has been monitoring the health of the economy via its Economic Downturn and Economy Watch member panel surveys, in addition to its quarterly Referendum research. The Forum's research is produced as part of the organisation's Communications Director business support solution.

 

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