MercoPress. South Atlantic News Agency

UK economy shrinks 0.2% in third quarter; longest ever recession

The UK recession began in the April-to- June quarter of 2008

The United Kingdom has now lost 6% of its entire economic output in its longest ever recession, official figures have confirmed. The current slump is on a par with the 1980s recession which blighted former premier Margaret Thatcher's early years in power.

The figures showed the economy shrinking by 0.2% between July and September - a record sixth quarter in a row of decline - due to a weaker performance from the UK's powerhouse services firms.

This is better than the 0.3% previously estimated by the Office for National Statistics (ONS), but below the 0.1% hoped for by City experts after better recent construction data.

But the continued weakness among financial firms such as banks and insurers saw services output - which accounts for nearly three-quarters of the economy - down 0.2%.

The UK is expected to end its dreadful run with a return to growth in the final quarter of 2009 as consumers spend ahead of Christmas and bring forward other purchases to beat the VAT increase in January.

But Capital Economics chief European economist Jonathan Loynes warned: “With household debt still very high, credit constrained and a fiscal squeeze looming, the economy still has a lot to contend with.”

The British Chambers of Commerce (BCC) said the latest figures raised concerns about the strength of the recovery.

Previous quarters were also revised downwards by the ONS, adding to the depth of the slump. The economy shrank by a bigger than first thought 0.7% between April and June and by 0.9% in the third quarter of 2008.

Between July and September, production output fell by 0.9% on the quarter, with a 0.2% decline registered by manufacturing firms. But there were some bright spots in the figures showing a recovery in retail spending as well as a 0.7% output rise from businesses such as hotels and catering.