Finance News

Britain’s Economy Shrinks by a Staggering 0.7%

In the worst news to hit the coalition since they came to power, the economy has shrunk by a staggering 0.7% in the second quarter of 2012. Britain’s economy is now smaller than it was when the coalition came to power in 2010.

Britain is now the second-worst performing country in the G8, the eight biggest economies in the world, with only Italy doing worse. Following the announcement, the value of Pound Sterling dropped and there are now fears the UK will have its credit rating downgraded.

The Conservative-Liberal Democrat coalition’s aggressively pursued campaign of austerity was already being questioned by international financial institutions, groups in the City, business leaders and members of the opposition. Now, there seems to be little doubt about whether the policies are failing.

Ed Balls, the Shadow Chancellor, said “these shocking figures speak for themselves. As we warned two years ago, David Cameron and George Osborne’s ill-judged plan has turned Britain’s recovery into a flatlining economy and now a deep and deepening recession.”

Despite other countries in the G8 showing more promising figures, including some in the EU, David Cameron has claimed that Britain’s economic failure can be blamed on the eurozone crisis rather than his party’s economic policies: “The challenge is particularly great in our neighbourhood. Since the financial crash the world economy has grown by 20%. But Europe’s has hardly grown at all.”

There was already an expectation that these figures would show a reduction in the economic output of the country, but nobody had thought they would be quite this bad. With rumours of George Osborne being removed from his post as Chancellor in a cabinet reshuffle already circulating, this news seems to make that, and a shift in coalition policy, all the more inevitable.