Britain's GDP shrinks 1.9 per cent in first quarter

The UK's gross domestic product (GDP) slumped 1.9 per cent in the first quarter of 2009 - the biggest quarterly GDP decline since the third quarter of 1979.

This, compared with a decrease of 1.6 per cent in the fourth quarter. The increased rate of decline in output was due to weaker services and production output, according to the Office for National Statistics (ONS).

The new revelations by ONS cast doubts over the chancellor Alistair Darling's 2009-10 budget forecast that the economy would start growing at the end of this year and receive a growth of 1.25 per cent in 2010 and 3.5 per cent since 2011.
 
The figures shows that recession was affecting nearly all parts of the economy, experts said.

Construction output decreased by 2.4 per cent, compared with a decrease of 4.9 per cent in the previous quarter.

Total production output weakened further in the first quarter, decreasing by 5.5 per cent, compared with a fall of 4.5 per cent in the previous quarter. Manufacturing output made the largest contribution to the slow down, falling by 6.2 per cent compared with a 4.9 per cent decrease in the previous quarter.

Mining and quarrying fell by 3.4 per cent compared with a decrease of 3.2 per cent in the fourth quarter. Electricity, gas and water output decreased by 1.9 per cent, compared with a fall of 1.3 per cent in the previous quarter.

The ONS figures show services output weakened by 1.2 per cent compared with a fall of 0.8 per cent in the fourth quarter. Business and finance made the largest contribution to the decrease in output. Business and finance and Transport and communication contributed most to the increased rate of decline.

Distribution, hotels and restaurants fell by 1.2 per cent, compared with a decrease of 2.0 per cent in the previous quarter. Hotels and restaurants and wholesale contributed most to the reduction.

Transport, storage and communication fell by 2.9 per cent, compared with a fall of 1.0 per cent in the fourth quarter. Other transport services and land transport made the largest contribution to the decrease in output.

Business services and finance decreased by 1.8 per cent, compared with a decrease of 0.5 per cent in the previous quarter. Other business services made the largest contribution to the fall in output.

Government and other services output increased by 0.5 per cent, compared with negative growth of 0.3 per cent in the previous quarter. Health and social work made the largest contribution to the increase.

Agriculture, forestry and fishing output increased by 0.3 per cent compared with a decrease of 0.2 per cent in the previous quarter.

The International Monetary Fund last month gave a much worse forecast for the British economy, saying that the economy would shrink 4.1 per cent in 2009 and still contract 0.4 per cent in 2010.

The British Chambers of Commerce (BCC) said ONS figures reveals that the drastic measures already taken by the Brown government and Bank of England would not be enough to pull Britain out of recession.

''This decline is much worse than expected and shows that the downturn is more severe than most analysts thought. The fall in activity across all sectors indicates that the measures taken to fight the recession so far have not been enough,'' said David Kern, chief economist at the BCC.

''Support announced in the Budget will have to be supplemented by more aggressive steps to prevent the loss of jobs, and the Bank of England will have to apply quantitative easing more forcefully,'' he said, adding that ''with RPI inflation in negative territory, fears of inflation must be set aside until the deepening recession is curbed.''