What caused the recession?

Britain is officially back in recession. After the recovery failed to gain any traction in 2011 when the economy grew by a paltry 0.8 per cent for the full year.


And 2012 has begun badly.


The economy shrank 0.3 per cent in the final quarter of 2011 and then another 0.2 per cent in the first quarter of 2012.


That marks a technical recession, something analysts had thought the UK would narrowly avoid.
It also means we're in the first 'double-dip' recession since the economic turmoil of 1975. 'Double dip' is where the economy goes back into a recession before it has had a chance to recover its previous high of economic output.


WHAT IS A RECESSION?


The technical measure of recession' is two 'quarters' of the year, back-to-back, where the size of the economy shrinks, as measured by GDP (Gross Domestic Product).


And we're certainly not there yet given the weak recovery - the economy saw below-par 2.1 per cent expansion in 2010 following a 7.1 per cent plunge during the Great Recession of 2009.
While recession this time is expected to be brief and mild - we could exit almost immediately - the overall economic situation is unlikely to dramatically improve any time soon.
And we're now in the longest slump in more than a century.
The graph below shows how the economy has recovered after previous recessions. This downturn has been worse than the Seventies, in terms of the trajectory of the economy, and even more severe than the Great Depression of the 1930s, when GDP recovered its previous high after nearly four years.

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