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Sat, Jul 25, 2009 - Page 10 News List

British economy shrinks more than expected in Q2

AFP AND REUTERS , LONDON

Britain’s economy shrank in the second quarter at its fastest yearly pace since records began in 1955, as the worst recession since the early 1980s tightened its grip, official data showed yesterday.

The Office for National Statistics said GDP fell by 0.8 percent on the quarter, taking the annual decline to 5.6 percent.

Analysts had forecast a quarterly decline of just 0.3 percent after a hefty 2.4 percent drop in the first quarter.

The figures suggest that recovery could take longer than expected and may boost expectations that the Bank of England could yet add more stimulus to the economy, having already cut interest rates to a record low and embarked on a £125 billion (US$207 billion) quantitative easing program.

The British economy has now shrunk for five consecutive quarters with a cumulative decline of 5.7 percent.

That is more than double the drop seen in the recession of the early 1990s and not far off the 6.4 percent contraction experienced in the recession of the early 1980s.

“The provisional UK GDP figures for Q2 are shockingly bad and firmly dash any hopes that the UK had already pulled out of recession,” said economist Vicky Redwood at the Capital Economics consultancy.

A breakdown of the figures showed business services and finances, a sector that has boomed for much of the last decade, accounted for more than a quarter of the GDP decline in the second quarter.

Overall, services fell by 0.6 percent on the quarter and by 3.8 percent on the year.

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