U.K. Double-dip recession: GDP shrinks by 0.7% in second quarter

This article was last updated on April 16, 2022

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The U.K.’s recovery hopes faded today after shock figures revealed the economy shrank by a worse-than-expected 0.7% between April and June.

Finance minister, George Osborne said that the shocking figures released on Wednesday showed Britain had “deep-rooted economic problems”, adding that the decline in the second quarter was disappointing even when taking into account one-off factors that hurt.

The Office for National Statistics (ONS) has disclosed that Britain’s gross domestic product fell 0.7 percent compared with the first three months, the sharpest fall since the height of the global financial crisis since 2009, showing a bigger drop than any of the economists surveyed in a Reuters poll last week had expected.

Britain’s service sector output – which makes up more than three quarters of GDP – shrank by 0.1 percent in the second quarter after growing 0.2 percent in first quarter of 2012.

Industrial output was 1.3 percent lower, while construction – which accounts for less than 8 percent of GDP – contracted by 5.2 percent, its biggest drop since the first quarter of 2009.

Britain’s economic performance during the recent quarters looks bad when compared to the worst-hit eurozone countries. Spain is shrinking at a quarterly rate of only 0.4%.

However, Mr. Chancellor has emphasized that while unemployment is indeed dropping in the U.K., this is hardly a sign that the economy is in rude health.

Mr. Osborne himself studied history at Oxford University, so the significance of today’s figures is unlikely to be lost on him as Britain is facing the longest slump in history.

And while some of the fall is certainly due to temporary factors – that an extra working day was lost to the Jubilee bank holiday, not to mention the awful weather last month – there’s no disguising the severity of the problem.

The Treasury has announced a number of policies aimed at getting growth going and last week they unveiled a new scheme to help boost lending to companies undertaking infrastructure projects.

Shadow chancellor, Ed Balls said the Government “should wake up and listen. The figures speak for themselves and are truly shocking. It doesn’t have to be this way. I do think that David Cameron and George Osborne need to wake up and listen.”

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