Tags: uk | recession

Dubious Distinction: UK Last Nation in Recession

Wednesday, 25 Nov 2009 09:01 AM

LONDON -- Britain remains stuck in a record recession, official data showed on Wednesday, but economists forecast a return to growth before the end of the year ahead of a general election.

The economy shrank by 0.3 percent in the third quarter, compared with output in the previous three months, the Office for National Statistics (ONS) said in a statement.

This was an improvement on an initial ONS estimate given last month that said the economy had contracted by 0.4 percent between July and September.

"The third-quarter GDP data for the United Kingdom showed a minor upward revision, in line with expectations," said economist Charles Davis at the Centre for Economics and Business Research consultancy.

"This is still some way short of the return to positive growth seen in the eurozone and OECD as a whole," he added.

The eurozone, France, Germany, Japan and the United States have all returned to growth following the worst global economic downturn since the 1930s.

Britain, suffering from high unemployment and massive public debt caused by the financial crisis, is to hold a general election by mid-2010, which Prime Minister Gordon Brown's Labour government is widely expected to lose to the main opposition Conservatives.

Analysts say the main reason for this is the state of the British economy -- which has contracted for six quarters in a row, Britain's longest recession since records began in 1955.

"GDP contracted by 0.3 percent in the third quarter of 2009," the ONS said on Wednesday.

"This has been revised from a fall of 0.4 percent in the preliminary estimate of GDP, due to upward revisions to services. GDP is 5.1 percent lower than the third quarter of 2008," it added.

The quarter-on-quarter and annual figures for the July-September period were both in line with analysts' consensus forecasts.

Markets were left shocked last month when an initial ONS estimate said Britain's economy had shrunk by 0.4 percent in the third quarter, because expectations had been for a return to growth.

Analysts found some positives in Wednesday's data, however.

"The good news is that UK GDP contracted modestly less than previously estimated in the third quarter," said IHS Global Insight economist Howard Archer.

"This is also good news for we economists as it means we were slightly less wrong in our forecasts of a return to growth. The bad news is that the data still show the economy in recession in the third quarter and so we economists were still wrong.

"But we will be right in our forecasts that the economy will finally return to growth in the fourth quarter," he added.

The technical definition of a recession is two or more quarters running of contraction, quarter compared with previous quarter.

Although the United States has officially pulled out of recession, revised data showed on Tuesday that the American economy grew at an annual pace of 2.8 percent in the third quarter.

That was a sharp downwards revision from the previous estimate of 3.5 percent.

"While the latest (British) data is likely to be revised up again, it is clear that the UK recovery is lagging behind those seen in other Western economies, let alone the strong bounce back in Asia and other emerging markets," added CEBR analyst Davis.

Copyright © 2009 Agence France Presse. All rights reserved.


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