More nasty economic numbers – but the Bank of England might be prepared to offer some more help

Recesssion looms, even with Threadneedle Street considering further intervention to calm markets, writes James Moore

Not working: the prime minister and chancellor are presiding over a nasty economic squall (AFP via Getty)

GDP fell by 0.3 per cent in August, which caught the City on the hop and can be filed under “nasty tumble”, but there was some good news to report. The Bank of England has reportedly told bankers it could extend its intervention in the bond markets, even as it has been urging the nation’s battered pension fund to sort itself out because it’s absolutely going to walk away at the end of the week.

Threadneedle Street isn’t keen to be engaged in semi-permanent handholding in the markets, but a little stability right now would go a long way. The Bank could provide that, and it should. Elsewhere, however, the pain continues with that August number showing an economy looking like one of those fields full of rotting fruit whose owners weren’t able to find pickers.

A sharp decline in manufacturing and maintenance work slowed down the oil and gas sector, reduced health spending caused drug companies to reign in production, sports events took a breather after the boost delivered by the women’s Euros. Housebuilding provided a bit of a boost and the Office for National Statistics (ONS) was keen to point out that lawyers, architects and accountants did well over the summer, offsetting some of the decline in the UK’s dominant services sector. But that’s rather like saying the new midfielder had a good game in the midst of a 3-0 thumping.

September will likely show another decline because of the extra bank holiday to account for the Queen’s funeral in which the economy went into a deep freeze. Usually, the impact of people being off work is offset by an uptick in retail and hospitality, but on this occasion mourning was made all but compulsory and just about everything closed.

The economy needs to record two consecutive three-month quarters in negative territory to meet the technical definition of being in recession, and the ONS recently revised the numbers from the last one up, so we’re not quite there yet. This could happen again. The August number is an early estimate based on incomplete data. However, the trend looks awful. Inflation is brutally squeezing the consumer to the extent that even the supermarkets aren’t displaying their usual excitement about the festive season, and the wider global scene can be filed under “icky”.

The government’s justification for giving UK plc a sugar rush with billions of pounds of unfunded tax cuts was that it wanted to get growth up to 2.5 per cent. It looked doubtful the moment the chancellor stood up to announce it. Now it’s just a bad joke. While the world is sniffling, the government cannot evade responsibility for Britain catching the flu. Much of the alleged benefit from the tax cuts is going to get eaten up by the higher interest rates the Bank is going to have to impose to bring order to the chaos that the chancellor’s disastrous mini-Budget has created.

The best Christmas present for UK plc would be for the reports of Tory plotting to turn into something more than just Westminster gossip. Changing leaders for the second time in the government’s term would look dreadful but it might hasten the recovery. The markets don’t much like political instability (who does?) but they’re quite keen on competence, which could go a long way to restoring confidence and helping the nation get through the worst of this.