First-quarter economic decline in Britain biggest in more than 50 years

THE UK economy shrank by the most in more than 50 years in the first three months of this year, according to revised figures that were much weaker than originally estimated.

The UK Office for National Statistics yesterday reported a decline in gross domestic product (GDP) of 2.4 per cent compared with the previous quarter, significantly sharper than the 1.9 per cent it initially calculated. Economists had expected a 2.1 per cent fall.

The revision followed the introduction of new construction sector data and more complete services sector figures.

Not since 1958 has the quarter-on-quarter decline in GDP been greater, while the 4.9 per cent drop compared with a year earlier was the largest since records began in 1948.

“You’ve never had it so bad seems the most apt summary of the state of the UK economy in Q1,” said RBS economist Ross Walker. “Although to some extent this is old news, it does serve to emphasise the size of the hole out of which the UK must climb.”

The precipitous decline in GDP in the first quarter highlights the depth of the recession in the UK. But since the end of the first quarter there have been growing signs the economy is stabilising.

Manufacturing output grew in March and April, while survey data suggested the economy had returned to growth.

The National Institute for Economic and Social Research think tank said the economy returned to growth in April. But the Bank of England has said the economy faces a slow recovery as banks remain fragile and lending is weak.

Construction sector output was revised down to show a 6.9 per cent decline from the first estimate of a 2.4 per cent drop.

Services output, which makes up about three-quarters of the UK economy, was revised down to a drop of 1.6 per cent rather than the initial estimate of 1.2 per cent. – (Copyright The Financial Times Limited 2009)