Open Close

UK economy shrank 0.7% in second quarter

A sharp decline in the UK’s economy was announced today by the Office for National Statistics (ONS).

The statistics agency estimates that GDP declined by 0.7% between the first and second quarter, extending and deepening the country’s double-dip recession which was confirmed in the first quarter.

The UK economy has now contracted for three quarters in a row.

Economists had expected the second quarter figures to show a contraction of around 0.2%. The ONS stressed, however, that the latest figures are more uncertain than usual because of the poor weather in April and June and the extra bank holiday in June for the Queen’s Diamond Jubilee celebrations.

The statistics agency is not yet sure how much impact these factors had on the economy, particularly in June, and its initial estimate is subject to revision as more information comes in.

Just over half of the fall in GDP for April-June 2012 was attributed to weakness in the construction sector, with construction output dropping 5.2%, following a decrease of 4.9% in January-March. Year-on-year, construction output decreased by 9.7%. Industrial production, which includes manufacturing, fell 1.3% compared to a decrease of 0.5% in the first quarter and output of the service industries was down 0.1% after previously growing by 0.2%.

Chancellor George Osborne described the figures as disappointing and said that the UK economy has deep-rooted economic problems. He added that the government needs a “relentless focus on the economy” and that recent announcements on infrastructure and getting lending to businesses show it is taking steps to encourage growth.

Other economic indicators have suggested that the economy is gaining strength: last week the ONS reported a fall in unemployment in March to May 2012, compared with the three months from December 2011 to February 2012.

John Cridland, director-general of business organisation the CBI, commented that businesses on the ground tend to share the view that the economy is flat, rather than negative, and there is potential for the country to return to growth later in the year.


If you enjoyed this post, please consider leaving a comment or subscribing to the RSS feed to have future articles delivered to your feed reader.