Fears UK is slipping back into recession grow
BRITAIN'S trade deficit widened to a new record while falling employment and a sharp slowdown in shop-price inflation reinforced fears that Ireland's largest trading partner is slipping into recession.
Among the most worrying figures for many Irish exporters will be the news that shop-price inflation eased to the slowest rate this year last month as flagging consumer demand and competition among supermarkets pushed down food costs.
Tesco, Britain's largest supermarket chain, cut prices of 3,000 basic items such as milk and vegetables in September, which will help British consumers but make it more difficult for farmers and food companies selling into the British market.
The head of Britain's third-largest supermarket group Sainsbury's, Justin King, said yesterday that shoppers were "under tremendous pressure" as disposable incomes were squeezed by higher prices, muted wages growth and austerity measures.
The new data came after the Confederation of British Industry cut its forecast for UK growth for this year and next.
The welter of gloomy news is piling pressure on Chancellor George Osborne to come up with a plan to boost growth when he delivers his autumn budget statement to parliament later this month, though he has already ruled out easing the pace of austerity measures.
Worries that Britain may face another recession prompted the Bank of England to resume its quantitative easing programme with a £75bn cash injection last month.
The CBI, a business lobby group similar to IBEC, said continued uncertainty in the eurozone was the main reason why it downgraded its UK growth forecast to 0.9pc this year from a previous 1.3pc.
And it said it expected inflation to fall back to 2.2pc by the end of next year -- close to the bank's 2pc target -- from the current 5.2pc.
Official data showed Britain's goods trade deficit widened to £9.8bn in September, its highest since the records began in 1998, as a record jump in imports countered a tepid rise in exports.
Economists cautioned against interpreting the surge in imports as a harbinger of recovering domestic demand.
"With the eurozone problems no closer to being resolved, we continue to doubt that the UK's external sector will prevent the economy from sliding back into recession," said Vicky Redwood of Capital Economics.