U.K. Economy Shrinks Most Since 1979

The UK economy contracted much more sharply in the first quarter of this year than economists expected, casting doubt on the chancellor’s economic forecasts made in this week’s Budget
TradingEconomics.com, Financial Times 4/24/2009 5:08:54 AM

GDP in the first three months of 2009 contracted by 1.9 per cent from the level seen in the fourth quarter of 2008, according to the Office for National Statistics.

Output reduced in all areas of the economy, with the sharpest decline experienced in the manufacturing sector, where output fell by 6.2 per cent from the previous quarter.

It is the fastest quarterly decline in national income since the third quarter of 1979, according to Richard McGuire, fixed income strategist at RBC Capital Markets.

Alistair Darling, the chancellor, predicted output output would fall by 3.5 per cent in this week’s Budget but maintained the UK would return to growth of 1.5 per cent next year. He also said the UK would have to issue £200bn of government debt to pay for record borrowing of £175bn this year.

But economists on Friday questioned the chancellor’s assumptions just days after his second budget.

U.K. Economy Shrinks Most Since 1979