The weakness still being seen in the UK is “unprecedented” as high unemployment is likely to do lasting damage to the economy, according to a leading think-tank.
The National Institute of Economic and Social Research latest report points out that the UK economy remains more than 4 per cent below its pre-crisis peak some four years after the start of the recession.
Preliminary data from the Office for National Statistics recently suggested that the UK returned to recession in the opening three months of the year, after the economy contracted by 0.2 per cent over the first quarter.
The Niesr reports: “Of course, revisions may change this. However, small quarter to quarter movements of this sort are largely irrelevant to the broader picture of an economy that remains very weak.
“Our monthly estimate of GDP suggests the level of economic activity in the economy in March 2012 was the same as in September 2010. This clearly does not constitute a sustained recovery, so the question of whether or not the economy is technically in a double-dip recession is moot.”
The institute also predicts that the unemployment rate will rise to about 9 per cent over the course of the year and remain high for some time to come.
“Elevated unemployment for such a long period is likely to do permanent damage to the supply side of the economy, with large long-run economic costs,” it warns.