GDP Contraction UK suffers biggest GDP contraction since 1980

The UK economy contracted the most since 1980 in the fourth quarter of last year as the financial crisis prompted consumers and companies to cut back on spending.

Gross domestic product (GDP) fell 1.5 percent from the third quarter, matching the previous estimate, the Office for National Statistics said yesterday. Consumer spending declined 0.7 percent in the quarter, the most since 1991, while fixed investment fell 2.3 percent.
The UK economy needed a stimulus to stem the recession and head off a risk of deflation, Bank of England policy maker Andrew Sentance said on Tuesday. The government may announce further measures this week to support banks as the financial crisis persists.
"The UK economy is certainly in a recession if not a mini depression," said Neil Mackinnon, the chief economist at ECU in London. "Things are likely to get worse before they get better."
The central bank will take its next decision on March 5.
Policy makers have already cut the benchmark interest rate to 1 percent, a record low, and have signalled that they want the power to create money to help stimulate the economy.

The drop in GDP was less than the 1.6 percent median forecast of 26 economists in a Bloomberg survey. On the year, GDP fell 1.9 percent, exceeding a prediction of 1.8 percent.
Retailers Stylo, JJB Sports, Woolworths, Zavvi and Adams Childrenswear are among the UK businesses that have collapsed in the past six months as consumers have cut spending.

Home builder Barratt Developments yesterday wrote down the value of land holdings and unfinished stock by £495 million (R7.2 billion) amid the UK's worst housing slump in 30 years.
The statistics office said industrial output fell 4.5 percent in the fourth quarter, compared with a previous estimate of 3.9 percent. Manufacturing fell 5.1 percent, versus 4.6 percent.
However, the services sector fell 0.9 percent against a previous estimate of a 1 percent dip.
Sentance said he saw an "outside risk" of "persistent" price declines. Deputy governor John Gieve said last week that Britain faced a risk of a decade-long depression. Both officials said economic stimulus from the central bank and the government would stem the slide in growth.


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