Economy: Grim reading

Grainne Gilmore

The stagnation of the British economy between April and June will come as a hammer blow to the Government. No longer can Gordon Brown boast of economic growth in every quarter since Labour came to power. In fact, the zero per cent growth is the weakest performance of the economy since the tail end of the last recession in 1992.

Ministers taking comfort in the fact that today's figure was not negative should think again. The signs coming from the services, manufacturing and construction sectors, the machinery that runs our economy, were grim in July, suggesting the worst is yet to come. It looks like we have started the slow slide into recession, rather than avoiding one.

Manufacturing and Construction were particularly weak in the second quarter, contracting by 0.8 per cent and 1.1 per cent respectively, and the service sector grew by just 0.2 per cent.

This does not bode well for employment. As firms become more circumspect about demand, they will inevitably look at trimming costs where they can.

But the economic gloom may have a silver lining for homeowners. As long as inflation falls sharply after spiking at 5 per cent, in line with the Bank of England's predictions, the Bank will have room to cut interest rates in a bid to boost the flagging economy. If, however, inflation continues to rise, the pain for consumers and homeowners will only intensify as prices rise and the economy shrinks.

Rentokil: Deep infestation

Peter Stiff

Interim results from Rentokil Initial were always going to disappoint but this morning’s announcement from the pest control-to-parcel delivery group was even worse than feared and the outlook for the business remains bleak.

The company has already issued four profits warnings since December, warned investors of a lengthy recovery plan and cautioned that there would be a substantial dividend cut.

Alan Brown, the chief executive appointed earlier this year to turn the company around, has been at pains to point out that rescuing Rentokil will take the best part of five years, with many predicting that a full recovery could take even longer.

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

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