Double-dip fears grow as gloom increases

Economic growth in the first two quarters of the year was weaker than first thought, the Office for National Statistics (ONS) said yesterday, while retailer Mothercare and airline Flybe issued profit warnings.

The ONS revealed the country was in a much worse position at the start of the recovery than previously assumed as the 2008-09 recession was much deeper than originally feared.

The troubling data will pile pressure on the Bank of England which will reveal the outcome of its policy meeting today.

Some economists warned a renewed recession was now more likely but the Treasury said it would not alter its deficit-busting austerity measures.

However, there was some respite as purchasing managers index (PMI) data showed the services sector rebounded in September and business investment increased 11.6 per cent in the second quarter to £30.6bn.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “The risk of renewed recession has clearly risen recently”. The current situation was one of an economy struggling for growth, he said.

Gross domestic product grew 0.1 per cent between April and June, against an earlier estimate of 0.2 per cent, while the first quarter was downgraded to 0.4 per cent from 0.5 per cent, the ONS said.

Mothercare, which has 353 stores across the UK, said a downturn in consumer confidence following the riots in August meant that the outlook has “materially worsened” while Flybe noted a significant slowdown in September.

Mothercare slump: Business Thursday, Page 1; Flybe dive: Business Thursday, Page 3.