News In Depth
Shock as economy shrinks by 0.7%
Britain has slumped to its longest double-dip recession in more than 50 years after shock figures revealed the economy shrank by a worse-than-expected 0.7% between April and June.
Gross domestic product (GDP) - a broad measure for the economy - fell for the third quarter in a row and by much more than the 0.2% expected by forecasters, according to the Office for National Statistics (ONS).
The dire performance, which represented the biggest quarterly fall since the depths of the financial crisis in the first quarter of 2009, was hindered by an extra bank holiday for the Queen's Diamond Jubilee and the wettest April to June period on record.
The figure is the ONS's first estimate and may be revised in coming months, but it suggests the UK is mired in the longest double-dip recession since quarterly records began in 1955 and it is believed to be the longest since the Second World War.
The last double-dip recession was in the 1970s, when the economy was hamstrung amid soaring oil prices and a miners' strike, but that only lasted two quarters.
The grim economic reading will heap more pressure on the Government and fuel criticism that Chancellor George Osborne's austerity measures are choking off the recovery.
The UK's economy is 0.3% smaller than when the coalition came to power in the second quarter of 2010, the ONS figures showed.
However, the statistics body said the Diamond Jubilee celebrations and the weather played a significant part in the latest slump, although it said it was too early to put a figure on its impact.
Mr Osborne said: "We all know the country has deep-rooted economic problems and these disappointing figures confirm that.
"We're dealing with our debts at home and the debt crisis abroad. We've made progress over the last two years in cutting the deficit by 25% and businesses have created over 800,000 new jobs.
"But given what's happening in the world we need a relentless focus on the economy and recent announcements on infrastructure and lending show that's exactly what we're doing."
The pound fell against the euro as the data increased chances that the Bank of England will pump more emergency money into the economy or drop interest rates further.
Vicky Redwood, chief UK economist at Capital Economics, said there was a possibility that the GDP figures are underestimating the true strength of the economy but added that it would take "pretty hefty revisions" to make the recent performance look even half decent.
She added: "What's more, the UK still faces significant obstacles, not least the knock-on impact of the renewed tensions in the eurozone. Even allowing for a decent bounce-back in the third quarter, we still expect the economy to contract by about 0.5% this year and to grow by only 0.5% in 2013."
what do you think?
"Shock"?! Who exactly is shocked that no-one's spending? Dave has ensured that, by handing me a 2-year (so far) pay freeze (still taxed at 42% though!), increasing the price of petrol and household bills (and everything else), adding £100 per month to my contribution towards my maybe-pension, I just can't spend. Believe me, I'd love to! I bet we're all in a similar boat. I suspect there's a hole in it...
I think you are spot on. People are fearful for their jobs and money is tight so they are hanging on to what they have. Their income is static while prices go up around them.You can't spend what you dont have and what they do have they keep just in case
SHOCK why shocked ,what stone have you been living under ? we are only a step away from being another Spain,or Greek crisis
How can this mupet be shocked? Lets face it if you give away billions and prop up other countries at your countries cost what did he expect. It is time for this disaster to go and remove thios coalition before it is too late. Perhaps it is too late but hey we are such a stupid country and the people just let is all happen.
Perhaps we'd all be a little more productive if employment law still actually supported the employee's rights. Maybe organizations like the once mighty NHS shouldn't make you reapply for your current post at a lower pay grade, or make you redundant without calling it that or paying a penny to support you in your search for another post. The stuff that's happening right now used to be illegal, and it's happening because the government wants it and the unions that used to fight for the working man were killed off three decades back. Until the government starts valuing the productive working citizen the economy will continue to slide downhill.
This is the price for allowing people to go striaght from university into politics as they have no experience of life. Once upon a time, Parliament was for the grown ups who had achieved something and wanted to give something back to the country. Now they are all seeking careers in politics. The economy needs to be stimulated by cutting taxation , much of which is inflationary, and politicians must learn that less taxation means more revenue as the economy is stimulated and also tax evasion is no longer worthwhile.
I agree with everything you have said its long overdue that these work experiance polatitions were sacked and let someone in that has some ideas on how to get this country going again their experiment has not worked,
Dear leaders (I think) Sack & Tax, What about lower taxes, people will buy more, more tax as people buy more, more things bought, more jobs, less on the Dole!
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a shock you have to be joking .This turkey has been told by just about everyone that he is ruining the country and these figures have proved it ,and i love the way that the figures were "hindered" by the jubilee rubbish ........when we were told how wonderful it would be for the economy !! anyone want to buy a jubilee tea pot now ?? try your local charity shop.This lot are finished .Good riddance
People have less monies due to no pay rises. Inflation is high meaning you get less for the litte monies you have. Unemployment is high. Wealfare cuts mean the sick no longer get help by way in incapacity benifit. People are scaed of loosing their jobs. Interest rates are low meaning no returns on investments for savers. If no one has monies to spend then the econamy falters. WHAT DO YOU EXPECT!
Regardless of political bias, the job is just too big for the present incumbents, no experience, no life skills. Would Osborne get employment in any other financial institution?