U.K. Economy Shrinks Most Since 1980

The U.K. economy contracted the most since 1980 in the fourth quarter as the financial crisis prompted spending by consumers and companies to shrivel.
TradingEconomics.com, Bloomberg 2/25/2009 5:33:56 AM

Gross domestic product fell 1.5 percent from the third quarter, matching the previous estimate, the Office for National Statistics said today in London. Consumer spending declined 0.7 percent on the quarter, the most since 1991, while fixed investment dropped 2.3 percent.

The British economy needs additional stimulus to stem the recession and head off the risk of deflation, Bank of England policy maker Andrew Sentance said yesterday. Prime Minister Gordon Brown’s government may announce further measures this week to support banks including Royal Bank of Scotland Group Plc as the financial crisis persists.

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 they want the power to create money to help stimulate the economy.

Today’s report showed that industrial production dropped 4.5 percent in the quarter, compared with a previous estimate of 3.9 percent. Manufacturing fell 5.1 percent, down from an estimate of 4.6 percent, the statistics office said.

Officials revised up their measure of the drop in services on the quarter. The category fell 0.9 percent instead of a previous estimate of a 1 percent decline.

U.K. Economy Shrinks Most Since 1980