The rapid decline in UK economic growth in the fourth quarter of 2008 was the worst performance since the second quarter of 1980, when the country was in the middle of steep downturn, and confirmed the economy grew at its slowest annual pace for sixteen years.
Fourth quarter growth was weaker than the 1.2 per cent decline economists on average had been expecting and follows a 0.6 per cent contraction in the third quarter. For the whole of 2008 growth was just 0.7 per cent.
The confirmation of Britain’s rapidly worsening recession comes after an awful week for the UK economy which has seen unemployment rise to nearly 2m and expectations for manufacturing orders sink to a 50-year low.
Sterling also fell to the lowest level against the dollar for more than two decades this week after a fresh package of measures unveiled by the British government to bailout Britain’s banks increased fears about the country’s debt levels. It was also the week that saw the Royal Bank of Scotland, which also owns the Natwest bank, say it would make the biggest loss ever for a UK company.
The weaker than expected GDP figure sent sterling to fresh lows against the currencies of its major trading partners.
The swift decline in the economy at the end last year followed the escalation of the credit crisis and freeze in global credit markets that was triggered by the collapse of Lehman Brothers, the investment bank, and AIG, the US insurer, in the autumn.
Economists on average expect the economy to contract by 2.4 per cent this year – which would be its worst performance since the Second World War. They also believe output is unlikely to climb back to last year’s levels until late 2011 or 2012.