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Recession hits the UK early

News that the European Commission believes that the UK will slip into a technical recession during the last two quarters of 2008 is not good news for Gordon Brown. Not only is the likelihood of a full blown recession more prominent than ever before (since the days of John Major in fact) but the authorities will have 3 or 4 months of bad news before the recession is actually confirmed and then more damaging headlines after that.

For those unaware, a recession is officially recognised if an economy reports negative growth for two quarters in a row. The EU (and many others) believe that the UK economy will contract by 0.2% this current quarter and the same again in the final quarter of the year. In simple terms - the recession that the authorities told us would never come!

On top of the recession prediction the EU has also pushed its forecast for UK inflation from 2.8% to 3.6% for the half year with some observers still suggesting that this is a little on the shy side. The question for the government is whether they can ensure that the economy picks up before the next general election which is likely to be in 2010.

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