The British economy has officially sunk into recession, with government figures yesterday showing the economy shrank 1.5 percent in the fourth quarter of last year as the financial crisis ravaged banks, retail and manufacturing.
It was the biggest decline since the early days of former British prime minister Margaret Thatcher’s government nearly 30 years ago.
Following the 0.6 percent decline recorded in the third quarter, Britain is now officially in recession — the standard definition of a recession is two quarters of negative growth.
The quarter-to-quarter drop in the fourth quarter came with both services and manufacturing output sharply down in the wake of the banking crisis, the seizing up of lending and already-confirmed recessions around the world, from the US to Germany and Japan.
The fourth quarter drop was larger than the 1.2 percent predicted by most economists and means that the British economy contracted by more than at any time since the 1.8 percent fall recorded in the second quarter of 1980 when the then new Thatcher government reined in spending to reduce the budget deficit and hiked interest rates to rein in double-digit inflation.
The output figure released by the Office for National Statistics was 1.8 percent lower in the fourth quarter from the same period the year before.
The annual decline was the biggest since the second quarter of 1991, when output was 2.2 percent lower during Britain’s last mired in recession.
For last year as a whole, GDP rose by 0.7 percent, down from the 3 percent growth in 2007, and the lowest level of growth since 1992’s 0.1 percent.
The average postwar recession in Britain has lasted for around 15 months, which would, if replicated during this current downturn, mean that the country will continue contracting until the autumn of this year. However, most economists think that this recession will last longer, and possibly last well into next year.