UK economy contracts

The recession-blighted UK economy shrank at its fastest rate for more than 50 years in the first three months of 2009, official figures showed this week.

Output fell by 2.4% in the first quarter of the year - much worse than the 1.9% drop previously estimated - the Office for National Statistics (ONS) said.

The quarterly decline equals a 2.4% slump seen in 1974 and is the worst since a 2.6% fall seen in 1958.

The figures also showed the current recession began earlier than expected, with a 0.1% decline seen between April and June last year compared with previous estimates of zero growth.

Following the revision - which also saw a deeper 1.8% decline in the final quarter of 2008 - the UK’s output is now 4.9% below the level seen before the recession.

The new figures for the first three months of this year reflect a much deeper-than-expected fall in construction activity during the period.

The UK’s services sector also endured its worst quarter on record with a 1.6% decline.

Liam Byrne, Chief Secretary to the Treasury, said the figures were “historic“, reflecting the state of the economy months earlier.

“They don’t change the judgment made by the Chancellor in the Budget that growth will return at the end of the year,” he added.

“There have been some tentative signs that the fall in output is moderating and I remain confident but cautious about the prospects for the economy,” Mr Byrne said.

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July 2009