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UK economy returns to recession
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A second consecutive quarter of negative economic growth between January and March means the UK has returned to recession, it has been reported.
Preliminary figures published by the Office for National Statistics (ONS) point to a 0.2 per cent contraction in the economy during Q1-2012.
This comes after a 0.3 per cent reduction in gross domestic product between October and December 2011, meaning there have been consecutive quarters of negative growth.
As a result, the UK has returned to technical recession, almost two-and-a-half years after the economy started to grow following the global financial crisis.
According to the ONS, a sharp fall in construction activity is to blame for the latest GDP slump.
The service sector is reported to have expanded by 0.1 per cent during Q1-2012, while the production industries declined by 0.4 per cent and construction by 3.0 per cent.
All figures are subject to revision by the ONS, which gives some hope that a technical recession can still be avoided.
David Kern, chief economist at the British Chambers of Commerce, described the latest GDP figures as "disappointing", but said they paint "an unduly pessimistic picture" of the state of the economy.
"Many commentators will question the accuracy of the data, particularly as it is based on only 40 per cent of the information used for these estimates," he added.
"As well as large falls in the construction sector, the estimate by the ONS that service sector output rose by only 0.1 per cent on the quarter will be seen as too low by most analysts."
But either way, Mr Kern said the UK's main priority must be to minimise any possible damage to business confidence.
"These figures are at odds with the experiences of many UK businesses, which continue to operate with guarded optimism," he added.
"But it is clear that economic growth in the UK remains much too low. We need to see a reallocation of priorities within Plan A that will bolster business growth."
This means reducing regulation, encouraging exports and improving infrastructure, Mr Kern stated.
"While the government must persevere with plans to reduce the deficit despite these figures, it must introduce more measures to empower businesses to drive recovery," Mr Kern stated.
Chancellor George Osborne said the UK is in a "very tough" economic situation.
"It's taking longer than anyone hoped to recover from the biggest debt crisis of our lifetime," he commented.
"The one thing that would make the situation even worse would be to abandon our credible plan and deliberately add more borrowing and even more debt."
Posted by Stephen Wilkinson
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