Recession official as economic output plunges

Britain's fall into recession became official after dire figures showed the biggest decline in economic output since 1980.

The UK economy contracted by 1.5 per cent in the final three months of 2008 - worse than expected by analysts and sparking fears of a deep and prolonged recession.

Output has not fallen so badly for more than 28 years, with the economy last suffering a bigger plunge in the second quarter of 1980 when the UK was battling soaring unemployment and inflation at the start of the Thatcher era.

The fourth quarter 2008 plunge comes after a 0.6 per cent fall in gross domestic product (GDP) in the previous three months - a "technical" recession, as defined by two successive quarters of negative output.

Economic experts at the Centre for Economic and Business Research (CEBR) said the figures were the "final nail in the coffin for Prime Minster Gordon Brown's claim to have 'ended boom and bust'".

Brown said the government was fighting the recession with "every weapon at our disposal".

He added: "We have had ten years of growth in this country that no other government has had in any period of previous history.

"We're dealing actually with a global financial crisis with a determination and confidence about how we can get through it."

Britain is the first major economy to publish GDP figures for the fourth quarter of 2008, but countries worldwide are set to be follow with equally gloomy data.

The estimated output figures from the Office for National Statistics (ONS) also showed that UK gross domestic product (GDP) growth for 2008 as a whole fell to 0.7 per cent, the poorest full-year output since 1992.

Business body the CBI warned the recession was set to be worse than that of the early 1990s. John Cridland, CBI deputy director-general, said: "The intensity and speed of falling demand combined with the global credit crunch mean this recession is going to be more painful than the early 1990s and sadly one consequence of this will be much higher unemployment."

The ONS said the manufacturing industry saw output decrease by 4.6 per cent quarter-on-quarter in the last three months of last year.

The powerhouse services sector, which accounts for about 75 per cent of the economy, fell by 1 per cent in its worst performance since the third quarter of 1979.

Total production, which includes manufacturing and accounts for 18 per cent of the economy, plunged by 3.9 per cent in the last three months of last year in the lowest reading since the second quarter of 1980.

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