UK data paints gloomy picture before budget statement

Tue Dec 4, 2012 7:24am EST
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By Jonathan Cable

LONDON (Reuters) - Britain's economic recovery remains precarious, data on Tuesday showed, with construction activity falling and retail sales weaker than expected - a blow to the government the day before a budget statement.

The weak data was accompanied by a report from the British Chambers of Commerce that said economic growth in the next two years will be slower than previously thought.

"The data support the evidence we've had that the fourth quarter is shaping up to be pretty weak, supporting the idea the Q3 rebound was entirely due to temporary factors," said Vicky Redwood at Capital Economics.

"It's not a particularly good backdrop for Osborne to be presenting against. He remains hemmed in."

Finance minister George Osborne is due to deliver a half-yearly budget statement to parliament on Wednesday.

He said on Sunday that closing the budget gap was taking longer than forecast, while weak growth means public borrowing is not falling as planned, endangering Britain's triple-A credit rating, which Osborne has pledged to defend.

The Conservative-led coalition government's failure to deliver a strong recovery is its biggest political problem and polls show the opposition Labour party would regain power if an election were held now.

The Bank of England launched a flagship scheme to boost lending in August, adding more stimulus on top of its 375 billion pounds of quantitative easing, but initial figures on Monday suggested any benefit to growth is several months away.   Continued...

Commuters cross the Millennium Bridge during a rainy morning, towards the financial district the City of London November 27, 2012. REUTERS/Stefan Wermuth