UK contraction worse than thought

2011-02-25 09:57:20

25 February 2011 Last updated at 14:55 Share this page Delicious Digg Facebook reddit StumbleUpon Twitter Email Print UK GDP figure revised down further Bad winter weather is blamed for the bulk of the UK economy's contraction at the end of 2010 Continue reading the main story UK Economy UK economy tracker Q&A: What is inflation? Calculate your inflation rate Q&A: What is GDP?

The UK economy shrank by more than previously thought during the last three months of 2010, revised figures show.

Gross domestic product (GDP) slipped by 0.6% in the period, according to fresh data from the Office for National Statistics (ONS).

Its initial estimate had suggested the economy had contracted by 0.5% - with heavy snow blamed for the slump.

However the ONS said that the revision was not a dramatic one.

"It's not that much of a shock, this is a very small revision," the organisation's chief economist Joe Grice told BBC News.

"The snow effect we think is still 0.5%. On the basis of that, the economy is still flattish at minus 0.1%. The overall picture is still a flattish underlying economy in the fourth quarter."

The latest US GDP figures for the same period were also released on Friday and also revised down, from growth of 0.8% to 0.7%.

The pound fell slightly after the UK figures were released, to trade at $1.607, down 0.5 of a cent. Against the euro, the pound was unchanged at 1.17 euros.

Weak construction Continue reading the main story “Start Quote

It wasn't a bad dream. The recovery really did stall in the final three months of 2010, and it wasn't only the weather. That is the most important conclusion to be drawn from today's second round of GDP estimates for the fourth quarter”

End Quote Stephanie Flanders Economics editor, BBC News Stephanomics: No good news on GDP

The ONS statement said that production industries, which include manufacturing and mining, had grown slower than previously estimated.

The service sector had also contracted by more than first thought, by 0.7% rather than 0.5%, the ONS said.

But the slump in construction had not been as bad, with the output of the industry declining by 2.5% rather than 3.3%.

GDP figures for a particular quarter are produced first as a so-called "flash" estimate, and are later revised at least twice as more detailed information is collated.

Shadow chancellor, Ed Balls, said the latest figures were "disappointing".

"Of course, we should always treat one quarter's figures with caution, but it is not cautious for the Treasury to plough on regardless," he added, accusing Chancellor George Osborne of "being complacent now in refusing to accept that his choice to cut too deep and too fast is holding back our economy and putting jobs at risk".

Continue reading the main story “Start Quote

In the UK, firms have been more reluctant to lay off workers, perhaps fearing it will be hard to find the employees they need when the recovery really gets going. ”

End Quote Robert Gardner Chief economist, Nationwide UK v US: Which is set to do best? US growth estimate revised down

However Chief Secretary to the Treasury, Danny Alexander, said he expected the economy to recover.

"Of course, as we have said before these figures are disappointing. We have got to deal with the fact that we have inherited an enormous budget deficit - the previous government maxed out the nation's credit card.

"But we have also got to do what we can to support the economic recovery. The early survey data suggests that the economy is able to bounce back and we are going to continue to do everything we can to support that."

One small business lobby group, the Federation of Small Businesses (FSB), said the weak figures meant the government should do more to help.

"We need to see the government use next month's Budget to provide economic stability," said FSB chairman John Walker.

"The government does have tools at hand to help boost the confidence of small firms, such as extending the National Insurance holiday to existing businesses that take on new staff and keeping to its manifesto promise and introducing a fuel duty stabiliser."

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