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It’s a recession, but not as we know it
A Manchester economic think-tank has produced research to show the UK is amidst a much different economic downturn compared to previous recessions and their aftermath.
It follows today’s preliminary estimate for Gross Domestic Product (GDP) in Q1 2012 from the Office for National Statistics (ONS), which shows the economy shrank by 0.2% in the first quarter of the year. GDP in Q4 2011 fell by 0.3% and the new data confirms that the UK is back in recession.
The research by New Economy, which creates economic growth and prosperity for Greater Manchester, shows that the current downturn is truly unique to the 21st Century and suggests those with the power to encourage growth and investment should respond appropriately.
Using Greater Manchester data, the briefing paper analyses the past six major recessions (including the most recent which began in 2008) to show:
• The length and depth of the shock to Gross Domestic Product (GDP) has been more severe, however unemployment has risen less dramatically in Greater Manchester compared to previous recessions.
• The cause of this has been a combination of labour market flexibility, with increased part-time working, lower hours, lower wages and higher self employment and inactivity, all of which have blunted the impact on unemployment.
• The structural shift in employment, from public sector services to private sector services, is far less severe than the wholesale shift from manufacturing to services experienced in previous recessions.
Mike Emmerich, chief executive of New Economy, said: “This is the first recession in 100 years that will not do long-term damage to Greater Manchester’s economy. Whilst the 2008 recession has been caused by structural factors, the shift in employment from public to private sector services has been much less severe than previous recessions and therefore shares many of the characteristics of a cyclical downturn, in which the regular business cycle hits a low point before returning to growth.”
“In the long-term, the scarring impact that this downturn has had on economic competitiveness and labour market participation is likely to be lower than previously experienced. With Greater Manchester leading the way in terms of measures to boost the economy, such as the £300 million investment fund to kick-start private sector projects and the recently announced City Deal, it is now vital that the momentum gained from schemes such as this is built on in order to support long-term sustainable growth.”
Baron Frankal, director of economic strategy at New Economy adds: “The outpouring of angst about the UK again plunging into recession will be as overdone as the lack of celebration had we narrowly avoided it. The difference though is only the size of a statistical error; and the affect is anyway the same whichever side of the technical line the figure falls. The economy is stagnating and will stagnate for the next period, and the big question is which parts of it – which firms, sectors and places – can nonetheless power ahead”.
“Our timely research has some surprising results, suggesting that the movement of the Greater Manchester economy is not sudden and structural, but gradual and predictable, and not wholly negative.
“A great deal of the structural heavy lifting is behind us, so the undergrowth is clearer than in most places for the firms of tomorrow to rise more rapidly in Manchester. This research helps light the path to understanding how Manchester’s heft can be best brought to bear to bring about more of the innovation and higher productivity that creates better paid and more sustainable jobs.”
Read the full paper here: Thinking New Economy – Briefing 22, is this recession different?
Updated over 2 years ago.
By: Mark ColemanReturn to top of page