UK might not have emerged from retrogression after all Analysis: Larry Elliott Business

Until currently the City was pretty assured there would be an ceiling rider in GDP total tomorrow - but those hopes have been dented. Photograph: Jason Hawkes/Getty Images

Forget a stand in dip. Britain might not have emerged from retrogression in late 2009 after all. Government total expelled this sunrise showed a thespian 6% tumble in commercial operation investment in the last 3 months of the year, that all alternative things being subsequent to would trim 0.5 points off output. Given that the primary guess of expansion in entertain 4 2009 was usually 0.1% , that"s not great news.

The even worse headlines is that a inauspicious 24% dump in investment over the past year leaves the economy in an enfeebled state as it attempts to redeem from the deepest and longest retrogression given the 1930s. This, remember, is a liberation that is ostensible to formed on a rebalancing of expansion from expenditure to investment and exports. Fat chance, on the basement of today"s report.

Let"s begin with what the total meant in the short term. On Friday, the Office for National Statistics publishes the initial rider of sum made at home product in the fourth entertain of last year. The ONS has 3 stabs at working out how well the economy did, since it takes time for interpretation to hurl in.

Up until this morning, the City was pretty assured that there would be an ceiling rider tomorrow, not slightest since production did rather improved in late 2009 than creatively believed. That goal was dented by today"s figures, with analysts right afar hedging their bets about possibly the rider will be up or down.

One bit of great headlines for the supervision is that investment usually tends to show up in the ONS"s third guess of growth, that will be published subsequent month. As a result, it is doubtful that tomorrow"s interpretation will show a pointy dump of 0.3% or 0.4% in wake up during the fourth quarter. The respite, though, will be proxy unless the alternative uninformed interpretation entrance is clever sufficient to equivalent the draw towards from investment.

It"s value remembering, also, that there were well-developed factors boosting expansion in the fourth entertain of 2009, in sold the inducement for consumers to move brazen purchases of big-ticket equipment prior to the finish of the VAT holiday. That was expenditure borrowed from early 2010, so the portents for the initial entertain of this year are not just shining either. The initial guess of expansion in this duration will be published in late April, and could well be the majority poignant square of interpretation to come out during the ubiquitous choosing campaign.

It is, though, the longer-term implications of the investment total that are so disturbing. As the British Chambers of Commerce noted, businesses have been slicing investment and using down their bonds in sequence to tarry a antagonistic meridian of diseased direct and shortages of finance. Manufacturing investment forsaken by 35% in between the fourth entertain of 2008 and the fourth entertain of 2009, suggesting that UK industry will be in no on all sides to take value of rising tellurian demand. It will be the familiar, joyless story of genius constraints fast biting, thwarting any attempts to change the economy afar from the over-reliance on monetary services and debt-driven consumption.