Double-Dip Recession Catches Britain Off Guard

Britain is a nation in shock, following Wednesday's announcement that its economy has slipped back into recession. It's the second time since the 2008 financial crisis, and it's raising new questions about the government's unpopular austerity measures.

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Britain is a nation in shock, following yesterday's announcement that its economy has slipped back into recession. The bad news is raising new questions about the government's unpopular austerity measures.

Vicki Barker has more from London.

VICKI BARKER, BYLINE: The news that Britain's economy has fallen into the dreaded double-dip recession caught everyone off guard - including Prime Minister David Cameron, who was immediately hit by a wave of criticism from parliament.

(SOUNDBITE OF VOICES)

PRIME MINISTER DAVID CAMERON: These are very, very disappointing figures. I don't seek to excuse them. I don't seek to explain them away...

BARKER: The euro crisis and the global debt crisis all weighing down the UK economy, the prime minister said. But that's not the whole story, says David Bailey. he's a business professor in Coventry, in England's manufacturing heartland.

DAVID BAILEY: Clearly, Europe is our biggest export market, that does have a big drag on growth. But we've also seen the biggest squeeze on real incomes in decades. That has affected consumer confidence and spending in the UK.

BARKER: And that is the conundrum: Cameron desperately needs growth, to slash Britain's massive budget deficit. So he needs to get British consumers spending again. But they're being squeezed by the steepest budget cuts in a generation; by record-low interest rates on their savings; and by creeping inflation.

The recession also poses a dilemma to Britain's central bank, the Bank of England: it was anticipating a recovery. With interest rates close to zero, it can only encourage spending with more monetary easing. The risk - that could send inflation even higher, further endangering any recovery.

For NPR News, I'm Vicki Barker in London.

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