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Fall in high-street activity raises fears of triple-dip recession Fall in high-street activity raises fears of triple-dip recession
(5 months later)
George Osborne will discover on Thursday, whether the UK slid into an unprecedented triple-dip recession in the first quarter of 2013, after the Treasury underlined the severity of the current downturn by extending the emergency Funding for Lending scheme until 2015.George Osborne will discover on Thursday, whether the UK slid into an unprecedented triple-dip recession in the first quarter of 2013, after the Treasury underlined the severity of the current downturn by extending the emergency Funding for Lending scheme until 2015.
Official figures will show whether the economy contracted for a second successive quarter at the start of the year – two consecutive quarters of decline is the standard definition of a recession. City economists are, on average, expecting a marginal expansion, of 0.1%.Official figures will show whether the economy contracted for a second successive quarter at the start of the year – two consecutive quarters of decline is the standard definition of a recession. City economists are, on average, expecting a marginal expansion, of 0.1%.
"The basic picture is stagnation, and the exact number is guesswork around that," said Vicky Redwood, of Capital Economics."The basic picture is stagnation, and the exact number is guesswork around that," said Vicky Redwood, of Capital Economics.
Labour was keen to point out that, even if today's number is positive, economic output remains well below its pre-crisis peak. Chris Leslie, the shadow chief secretary, said it would take expansion of 0.3% in the first quarter of the year just to take GDP back to where it was six months ago.Labour was keen to point out that, even if today's number is positive, economic output remains well below its pre-crisis peak. Chris Leslie, the shadow chief secretary, said it would take expansion of 0.3% in the first quarter of the year just to take GDP back to where it was six months ago.
"After nearly three years of flatlining, we need to see decisive evidence that a strong and sustained recovery is finally under way," he said."After nearly three years of flatlining, we need to see decisive evidence that a strong and sustained recovery is finally under way," he said.
Osborne's decision to keep the FLS – aimed at cutting the cost of borrowing for banks – open for an extra year beyond its planned closing date, January 2014, revealed the continuing concerns inside the government and the Bank of England that a shortage of loans is choking off recovery.Osborne's decision to keep the FLS – aimed at cutting the cost of borrowing for banks – open for an extra year beyond its planned closing date, January 2014, revealed the continuing concerns inside the government and the Bank of England that a shortage of loans is choking off recovery.
The business secretary, Vince Cable, said: "More credit for small businesses is essential to building a stronger economy. Alongside the business bank that I am setting up, the Funding for Lending scheme is a targeted intervention to help deal with this problem. It is right that it is skewed towards the SME sector, which has suffered the most from the credit crunch."The business secretary, Vince Cable, said: "More credit for small businesses is essential to building a stronger economy. Alongside the business bank that I am setting up, the Funding for Lending scheme is a targeted intervention to help deal with this problem. It is right that it is skewed towards the SME sector, which has suffered the most from the credit crunch."
Since its inception last summer, the FLS has helped to bring down the cost of mortgages, but ministers are alarmed that lending to small firms has continued to decline. The Bank's latest survey showed that lending to businesses had declined by 3.1% over the past year.Since its inception last summer, the FLS has helped to bring down the cost of mortgages, but ministers are alarmed that lending to small firms has continued to decline. The Bank's latest survey showed that lending to businesses had declined by 3.1% over the past year.
In a joint announcement yesterday, the Bank and the Treasury said they had redesigned the scheme to help to unblock lending to small businesses. For each £1 net increase in lending to small and medium-sized companies over the next nine months, banks will be able to draw down £10-worth of cheap funding from the FLS next year.In a joint announcement yesterday, the Bank and the Treasury said they had redesigned the scheme to help to unblock lending to small businesses. For each £1 net increase in lending to small and medium-sized companies over the next nine months, banks will be able to draw down £10-worth of cheap funding from the FLS next year.
The taxpayer-backed low-cost funding available under the scheme will also be extended to alternative lenders, such as leasing corporations, which have been increasingly popular among small firms struggling to raise funds from their bank.The taxpayer-backed low-cost funding available under the scheme will also be extended to alternative lenders, such as leasing corporations, which have been increasingly popular among small firms struggling to raise funds from their bank.
Fresh evidence that the economy is struggling to emerge from the unseasonably chilly winter came yesterday in the CBI's monthly snapshot of retail spending. Activity in Britain's high streets this month dropped to its lowest level since August 2012, as a combination of stretched household budgets and cold weather kept consumers out of the shops.Fresh evidence that the economy is struggling to emerge from the unseasonably chilly winter came yesterday in the CBI's monthly snapshot of retail spending. Activity in Britain's high streets this month dropped to its lowest level since August 2012, as a combination of stretched household budgets and cold weather kept consumers out of the shops.
According to the CBI's monthly distributive trades survey, 37% of retailers said sales were down from their level in April 2012, while 36% reported an increase. The balance of -1 point was in sharp contrast to the buoyant trading conditions recorded by the employers' organisation in the autumn of 2012, when monthly balances of +30 percentage points were reported.According to the CBI's monthly distributive trades survey, 37% of retailers said sales were down from their level in April 2012, while 36% reported an increase. The balance of -1 point was in sharp contrast to the buoyant trading conditions recorded by the employers' organisation in the autumn of 2012, when monthly balances of +30 percentage points were reported.
Barry Williams, Asda's chief merchandising officer for food and chairman of the CBI distributive trades survey panel, said: "Retailers were frustrated this month by the ongoing stagnation in sales growth. This may be explained in part by the unseasonable weather we suffered, but there is no doubt that high-street conditions are tricky, with consumers lacking the confidence to go out and spend, as they still feel the pinch in their pockets."Barry Williams, Asda's chief merchandising officer for food and chairman of the CBI distributive trades survey panel, said: "Retailers were frustrated this month by the ongoing stagnation in sales growth. This may be explained in part by the unseasonable weather we suffered, but there is no doubt that high-street conditions are tricky, with consumers lacking the confidence to go out and spend, as they still feel the pinch in their pockets."
Clothing and footwear shops showed the biggest drop in sales in April, offset by healthier trading conditions for supermarkets and furniture stores, and online sales. Howard Archer, UK economist at IHS Global Insight, said: "The disappointing April CBI survey intensifies pressure on the Bank of England to come up with more quantitative easing and sooner rather than later, in addition to the extension just announced to the Funding for Lending scheme."Clothing and footwear shops showed the biggest drop in sales in April, offset by healthier trading conditions for supermarkets and furniture stores, and online sales. Howard Archer, UK economist at IHS Global Insight, said: "The disappointing April CBI survey intensifies pressure on the Bank of England to come up with more quantitative easing and sooner rather than later, in addition to the extension just announced to the Funding for Lending scheme."
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