30/06/2009

UK Economy Shrinks At Fastest Rate For Half A Century

The British economy weakened at its fastest rate in over 50 years, new data released today has shown.

The figures from the Office for National Statistics (ONS) showed the economy had contracted by its fastest rate since 1957, with output falling to 2.4% - much worse than the 1.9% drop previously estimated.

According to the ONS, 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.

The ONS has blamed the sharp revision primarily on weaker output in the construction and manufacturing.

The figures are likely to come as a setback for the Treasury, whose forecasts have already been criticised as being "over-optimistic" by some economists.

Alistair Darling, in his April budget, had forecast a 1.6% contraction in the UK economy during the first three months of the year.

Last week, the Organisation for Economic Co-operation and Development, a respected European think-tank, forecast that the UK economy would shrink by 4.3 per cent this year.

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."

The Treasury has predicted the UK economy will contract by 3.5% for the year.

(JM/BMcC)

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