UK economy moving towards recession

24 10 2008 United Kingdom

The UK economy declined by 0.5 per cent in the three months to September, much more sharply than expected, according to official data released today

Gross Domestic product (GDP) fell by 0.5 per cent in the third quarter of this year, the first decline in UK output since 1992 and the biggest single drop in any quarter since the last recession in 1990.

Manufacturing output fell by 1 per cent, the second consecutive quarter of decline for this important sector of the economy. This means that UK manufacturing is officially in recession.

(A recession is accepted as meaning a fall in domestic economic output or GDP for at least two consecutive quarters.)

The services sector represents three quarters of the UK economy and dropped by 0.4 per cent. In the previous quarter this sector recorded no growth at all.

In the last quarter the biggest falls were registered in hotels and restaurants which dropped by 1.7 per cent. Construction output fell 0.8 per cent.

UK shares tumbled on the news, with the FTSE down by 8.5 per cent at one point.

Sterling also weakened, falling below $1.60 for the first time in the past five years. Although recent falls in the pound leave exporters potentially better off, their overseas markets have shrunk due to the effects of the global economic downturn.

The latest figures, coupled with the fall in oil prices, have increased expectations of more cuts in bank rate to stimulate growth in the UK economy.

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