By Jennifer Ryan March 11 (Bloomberg) — Gordon Brown is trying to turn the threat of a double-dip U.K. recession into an advantage. The British prime minister, whose Labour Party is narrowing the gap in opinion polls with the opposition Conservatives, is arguing that the economic recovery is too “fragile” to justify cutting the U.K.’s record budget deficit right away. Brown is seeking a fourth term for Labour as Britain struggles to recover from its worst slump in six decades. While jobless claims are at the highest since the party came to power in 1997, opinion polls show that Brown has made up so much ground that David Cameron ’s Conservatives will fail to gain a majority in the election, which must happen by June. “A weak economy might perversely be good for Labour,” Jonathan Loynes , an economist at Capital Economics Ltd. in London, said in a telephone interview. “To a degree it would support the government’s position that it shouldn’t try to tackle the budget deficit too quickly, and at the same time undermines the Conservatives’ position.” Reports this week showed factory production fell for the first time in five months in January, exports dropped the most in 3 1/2 years and evidence is mounting that a rebound in house prices is faltering after prices fell in February. “Although the economy is now growing, recovery is still in its early stages and remains very fragile,” Brown told business leaders in London yesterday. “We’re not going to withdraw the stimulus until the recovery is assured.” Deficit Squabble The Conservatives argue that the government should get to grips now with the budget deficit, which at 12 percent of gross domestic product is on a par with Greece’s. As Brown and Cameron squabble on the deficit, the Conservatives’ lead among voters is declining. The opposition party, which led by as much as 17 percentage points in polls in December, is now ahead by just 4 points, according to a YouGov Plc survey published in the Sun yesterday. That wouldn’t be enough to guarantee a majority in Parliament. “The Conservatives just haven’t convinced enough people that they’re going to be any better than Labour,” Steven Fielding , director of the Centre for British Politics at Nottingham University, said in a telephone interview. Labour, which presided over the first run on a British bank in more than a century when Northern Rock Plc nearly collapsed in 2007, is still lagging in voters’ perceptions of economic competence. In a YouGov poll published in the Sun this week, 36 percent of voters said the Conservatives were more likely to run the economy well, a six-point lead over Labour. Budget Due Fitch Ratings said this week that the U.K. needs to curb the deficit faster than planned by Brown, who argues that the economy needs support now against Conservative calls for spending cuts. Chancellor of the Exchequer Alistair Darling will present his budget on March 24. Manufacturing unexpectedly shrank 0.9 percent in January, while the goods trade deficit swelled to 8 billion pounds ($12 billion), the widest in 17 months. Jobless benefit claims have reached the highest since Tony Blair led Labour to power almost 13 years ago and Lloyds Banking Group Plc’s Halifax division says house prices dropped 1.5 percent in February. Conservative Treasury spokesman George Osborne argued yesterday in an interview on Sky News that “all the economic data show Brown is making things worse.” For now, Britain’s economy is holding up better on some measures than those of other countries. The U.K.’s unemployment rate of 7.8 percent in the fourth quarter compares with 9.7 percent in the U.S. and 10 percent in the euro region. At 2.46 million, the number of jobless is below the 3 million level that former Bank of England policy maker David Blanchflower said in 2008 was possible over the next two years. “Labour’s benefiting from the horrendous predictions for the economy that came out a year ago,” Nottingham University’s Fielding said. “The economy’s not doing that well, but it isn’t as bad as people feared.” To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net
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Brown Tries to `Perversely’ Benefit From U.K. Relapse Risk Before Election
