Nation of shoppers in rehab

15 September 2010 By Ian Campbell

Consensus says the UK recovery will continue next year. But big government spending cuts, public sector job losses, tax increases, houseprice falls, slipping wages and struggling exports suggest the UK faces a high chance of recession even if the global economy is recovering.

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Mervyn King, the Bank of England's Governor, told the Trades Union Congress on Sept. 15 that if the UK's economic recovery turns out to be weaker than expected policy can respond. He said the automatic fiscal stabilisers lower tax receipts and higher spending, for example on unemployment benefit would "act to stimulate demand". King also said that "monetary policy can react too, especially when there is a credible plan to reduce the deficit."

The UK's Office for National Statistics said the number of people claiming unemployment benefit rose by 2,300 in August. It was the first monthly rise since January. The ONS also reported that on the wider ILO measure unemployment fell by 8,000 in the three months to July to 2.467 million. The overall unemployment rate remained at 7.8 percent of the workforce. The number of people in work rose by 286,000, the biggest quarterly rise since records began, thanks largely to a 166,000 rise in the number of parttime workers.

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