Chancellor 'confident' on economy

Chancellor George Osborne has insisted the Government was doing everything possible to "weather the storm" as economic forecasters warned the UK is likely to be already in recession.

The Ernst & Young ITEM Club and the Centre for Economics and Business Research both believe that gross domestic product (GDP) shrank in the final quarter of last year and will fall again in the first three months of 2012. A recession is defined as two consecutive quarters of contracting output.

Mr Osborne said the most recent predictions by the Office for Budget Responsibility, which issues official forecasts, showed that Britain would have a negative quarter of growth but not go into recession.

He told BBC Radio 4's Today programme: "That's their forecast, but they were the first to say that it is very uncertain and one of the biggest risks to the British economy is the further deterioration of the eurozone crisis.

The Government is doing everything it can to deal with the economic crisis, Chancellor George Osborne has said

"I said openly at the end of November to the House of Commons when I made my autumn statement that if the eurozone were to go into a deep recession, that would have a real impact on the British economy.

"I'm confident the British Government is doing everything it can with a very difficult inheritance, facing a very difficult international situation to get Britain through this, to weather the storm."

The warnings come shortly after France, the second biggest economy in the eurozone, saw its AAA credit rating downgraded by Standard & Poor's in a move which signals more troubles for the single currency bloc.

Professor Peter Spencer, chief economic adviser to the Ernst & Young ITEM Club, said: "Figures for the last quarter of 2011 and the first quarter of this year are likely to show that we are back in recession and we are going to have to wait until this summer before there are any signs of improvement. But it's not going to be a repeat of 2009 - we are not going to see a serious double dip."

The ITEM Club report forecasts GDP growth of just 0.2% this year before increasing to 1.8% in 2013 and 2.8% in 2014. It said deteriorating levels of confidence will see business investment stagnate in 2012, while export prospects have already slowed.

But the group said UK companies have stronger balance sheets than in 2009 and have built up large cash stockpiles, which will provide a useful insurance policy if the situation deteriorates further.

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HAGUE CONDEMNS IRAN OVER URANIUM

Foreign Secretary William Hague tonight said he was "extremely disappointed" by Iran's decision to carry out high-level uranium enrichment and branded it a "provocative act".

A United Nation's nuclear watchdog confirmed today that the process is under way in a fortified underground bunker near the holy city of Qom.

The "clandestine nature" of the activity undermines Tehran's claims that its nuclear programme is entirely civilian, Mr Hague said.

He claims Iran can provide "no credible rationale" for producing such quantities of 20% enriched uranium, which can be turned into fissile warhead material, and called on it to stop production immediately.

Mr Hague said: "I am extremely disappointed by Iran's decision to start enrichment operations at its Qom facility.

"At a time when the international community is asking Iran to provide assurances of the peaceful nature of its programme, this is a provocative act which further undermines Iran's claims that its programme is entirely civilian in nature.

"Iran only acknowledged the facility at Qom after its existence became known. Its size, location and clandestine nature raise serious questions about its ultimate purpose.

"Iran can provide no credible rationale for producing so much 20% enriched uranium. Its claim to be enriching for the Tehran research reactor does not stand up to serious scrutiny.

President Ahmadinejad tours the Natanz uranium enrichment facility at Natanz, Iran in April 2008.

"Iran already has sufficient enriched uranium to power the reactor for more than five years and has not even installed the equipment necessary to manufacture fuel elements.

"If Iran has nothing to hide, it should seek every opportunity to reassure the international community of its peaceful intentions.

"In the absence of this, international pressure on Iran will only increase further".

The International Atomic Energy Agency (IAEA) confirmed earlier today that the enrichment process was under way at the underground Fordo plant, which Iran only acknowledged after the UK, United States and France revealed its existence in 2009.

PA 2012

IMMIGRATION 'NOT LINKED TO JOBLESS'

Immigration has little or no impact on the number of unemployed in the UK, a report said today.

The number of immigrants coming to the UK is not linked with the number of people claiming jobless benefits, the study by the National Institute of Economic and Social Research (Niesr) showed.

But it conceded that it is still not known whether an increase in the number of migrants coming to the UK leads to a fall in the number of low-skilled jobs for British workers which is masked by more jobs for highly skilled Britons.

The report comes after the campaign group Migration Watch UK said it would be a "remarkable coincidence" if there was no link between a 600,000 rise since May 2004 in the number of Eastern European migrants working in the UK and a 450,000 rise in youth unemployment in the same period.

Migrants from the so-called A8 countries which joined the EU almost eight years ago - Poland, the Czech Republic, Hungary, Slovakia, Slovenia, Estonia, Latvia and Lithuania - "have tended to be disproportionately young, well-educated, prepared to work for low wages and imbued with a strong work ethic", the campaigners said.

But today's report said: "We find no association between migrant inflows and claiming unemployment.

"The results show a very small negative and generally insignificant correlation between the migrant inflow rate and the change in the claimant count rate.

"A two percentage point increase in the migrant inflow rate, akin in magnitude to the large and sudden inflow of A8 migrants in the years 2004-2006, would, according to these estimates, be associated with a fall in the claimant count rate in the order of only 0.02 percentage points.

"For all practical purposes, these results suggest that migration has essentially no impact on claimant count unemployment."

There were also no signs of a more adverse impact of immigration during the recent recession, the report said.

But it added: "We cannot exclude that migrant inflows may be having positive effects on the employment of highly skilled native labour (because of complementarities) and negative effects on low-skilled native workers (because of substitutability) which net out in the aggregate."

The study looked at the number of migrants who were given National Insurance numbers between 2002/3 and 2010/11, and compared these with the number of people claiming unemployment benefits.

A Home Office spokeswoman said: "We have already made sweeping changes to tackle the uncontrolled immigration of the past.

"We have limited non-EU workers coming to the UK, with latest figures showing a year on year fall in work visas issued.

"We will shortly announce reforms of the family migration and settlement routes."

She went on: "We are also ensuring graduates and the workforce get the opportunities and skills they need so that they can find work."