Britain's double-dip recession is over

By Philip Aldrick, Emma Rowley and Jessica Winch

The return to growth will end nine months of contraction in which the economy shrank 1.1pc as the austerity measures, high inflation and the eurozone crisis took their toll. However, economists have warned that the underlying state of the economy remains weak.

In its first estimate of third quarter growth on Thursday, the ONS is expected to say that the economy grew by about 0.7pc. Samuel Tombs, UK economist at Capital Economics, said the third quarter’s headline figure will be 0.6pc while the National Institute of Economic & Social Research (NIESR) has forecast 0.8pc.

The figures come as mobile operator Three said it would be creating 380 jobs in Glasgow in addition to the 550 staff it already employs in the city as part of an 800-strong recruitment drive in the UK.

The Ernst & Young Item Club believes the UK will grow by 0.7pc.

The figure will be flattered by the automatic rebound from the lost working day due to the Queen’s Diamond Jubilee in June and the addition of Olympic ticket sales. The ONS has estimated that the extra bank holiday wiped 0.5pc off growth in the second quarter and the ticket sales will add 0.2pc to growth in the third quarter.

NIESR has calculated that stripping out the one-off items, its 0.8pc forecast equates to 0.2pc underlying growth.

Mr Tombs was more pessimistic about the outlook: “If it was not for the one-off factors, I think we see the UK economy contracting on an underlying basis. Demand from overseas is still pretty weak and inflation has been a bit slower to fall than we perhaps hoped.” He added that if the economy does not pick up momentum, the fourth quarter of this year could see a negative headline figure. For the year as a whole, the consensus is that the economy will contract by 0.3pc.

Despite the expected economic rebound, persistent weak growth has damaged companies’ profitability, analysis by accountants Ernst & Young has found.

The number of profit warnings in the third quarter hit its highest level for the three-month period since 2008 due to weak demand and economic uncertainty.

Companies quoted on London’s main market and smaller AIM issued 68 profit warnings in the three months to September, a third more than the same period last year.

Keith McGregor, head of restructuring for Europe, Middle East, India and Africa at Ernst & Young, said: “The underlying weakness of the UK economy and global growth concerns landed the heavier blows to profits and expectations. ”

He said profit warnings were generally lower than pre-crisis levels as market expectations have been set so low, but “when one does make a profit warning, it shows things are really out of step”.
Telegraph