The economy is on the brink of a double-dip recession – and snow is not the only factor to blame, a business group said.


Following yesterday’s shock GDP figures showing the economy had shrunk by 0.5 per cent in the final three months of 2010, the Forum of Private Business (FPB) argued that even without the bad weather economic activity would have been “flattish” – a point made by the Office for National Statistics.


The FPB blamed slow movement on policies to improve business finance – including addressing the lack of affordable lending from banks and tackling the £24 billion in late payments owed to small firms – as the real reason why the economy is facing two successive quarters of contraction, the definition of a double-dip recession.


It also pointed out that tax rises such as increased fuel duty – due to go up again in April by 1p – and the rise in VAT to 20 per cent on January 4 are hitting businesses and consumers.


“Small businesses have warned for some time that we are far from being out of the woods,” said FPB senior policy adviser Alex Jackman.


“Clearly, the harsh winter weather, costing the economy an estimated £230 million per day at its worst, has been one factor but still not enough has been done to remove the shackles created by tax, red tape and the continued lack of affordable funding preventing SMEs from growing, creating jobs lost in the public sector and driving real, sustained economic recovery.”


Mr Jackman warned: “Unless that changes, and changes quickly, there remains a very real threat of a ‘double dip’ recession and that could spell disaster.”


In contrast, the Confederation of British Industry (CBI) reckoned it was too soon to sound a double-dip alarm.


“On these data it is far too early to conclude that the UK economy faces a serious double dip, and it will be some months before the true picture of its underlying performance becomes clear,” said the CBI’s chief economic adviser Ian McCafferty.


At the British Chambers of Commerce, chief economist David Kern added: “In spite of these figures we believe the Government should persevere with the deficit cutting programme, but the economy is clearly fragile and policy must be implemented cautiously.”


He also urged the Bank of England’s Monetary Policy Committee (MPC) to abandon any early interest rate rise until the recovery is more secure.


“On its part, the Government must ensure obstacles that hamper businesses in their efforts to create jobs, invest and export must be removed.”