Recession bites

Although it comes as little surprise, the warning from the Ernst & Young Item Club that the UK is already in recession is the most significant confirmation that we’ve had so far about the poor state of our economy. Using the same forecasting model as the Treasury, they also predict that inflation is set to fall – giving more scope for interest rate cuts – and that the economy will start growing again in 2010.

The question remains about what the political effects of recession will be. Will a prolonged downturn erode the Our Saviour Brown narrative, along with the poll gains he’s made over the past few weeks? Or have Brown and Darling shored up enough confidence in their own economic competence, such that they will now be seen as the best men to have at the helm of our shrinking economy? I rather suspect the former. But we shall see – expectations have a habit of being bucked at the moment.