UK Recession Deeper Than Initially Thought | Prepaid365

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24 May 2012

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The UK is deeper in recession than originally thought, as figures from the Office for National Statistics (ONS) show that the economy shrank more than previous estimates had stated.

The British economy contracted by 0.3% in the first three months of this year, more than the 0.2% the ONS originally estimated.

The deeper recession has been put down to the steep decline in construction output, which fell 4.8% in the first quarter of 2012.

The is the largest decline in construction output since the first quarter of 2009, and comes after a fall of 0.2% in the final quarter of last year.

“Over the past eighteen months, the economy has experienced a mild contraction in output,” the ONS said in a statement.

“This reflects global economic headwinds as well as domestic economic conditions such as the impact of continuing high rates of inflation in the UK.”

The higher than expected economic contraction has led to expectations that the Bank of England will inject more money into the economy to try and aide recovery.

The Bank of England’s Monetary Policy Committee (MPC) announced it was halting its programme of quantitative easing earlier this month, having already injected £325 billion in recent years.

With growing concerns over the eurozone, which is Britain’s biggest trading partner, the MPC has said it is prepared to make further asset purchases.

“The economy is not recovering properly and with the uncertainty over Europe hanging over the outlook as well, our suspicion is the MPC will sanction further QE at some point later on this year,” said Philip Shaw, an economist at Investec.

In a year-on-year comparison, the UK’s economy has shrunk by 0.1% – the first yearly decline since the final quarter of 2009.

The economy has grown by just 0.3% since the coalition government came to power in 2010, with the double dip recession putting even more pressure on Chancellor George Osborne.

But the government has said it will be continuing with its heavy austerity measures, and that economic recovery will take a long time.

“What the figure confirms is that it is a very tough economic situation and that we will take time to recover from the biggest financial and debt crisis of our lifetime,” a spokesman for David Cameron said.

“We always have made clear… if the rest of Europe doesn’t grow, then it would prove hard to avoid a recession here in the UK and we cannot be immune to what’s happening on our doorstep.”

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