UK recession deepens after 0.7% fall in GDP


George Osborne: The government has to have "a relentless focus on the economy"

The UK recession has deepened, latest official figures have shown, after the output of the economy fell by 0.7% between April and June.

The contraction was much bigger than expected and follows a 0.3% drop in the first three months of the year.

The Office for National Statistics said the fall was largely due to a sharp slowdown in the construction sector.

It said it was not yet sure of the size of the effect of the poor weather and the extra June bank holiday.

This means that these figures, which are the first estimate for what happened in the economy between April and June, are more uncertain than usual.

"The bottom line from all this is that the underlying performance of the economy was probably somewhat better than the headline figure of -0.7% would suggest, having regard to the extra bank holiday and to the poor weather," said Joe Grice from the ONS.

"How much that effect might be is something we won't be able to say or to quantify until we have further experience against which to judge."

The figures could be revised in the coming months as more information comes in. The first estimate is largely based on information the first two months of the three-month period.

"Nevertheless, the overall picture is of an economy that remains fragile," the ONS said in its latest analysis of the economy.

Prime Minister David Cameron said the figures were disappointing: "They show the extent of the economic difficulties that we're grappling with, not least the situation right across the eurozone where our neighbours are also really struggling.

"Clearly we've got to keep doing everything we can to get out of this difficult situation and provide the growth and jobs that our people and our economy needs."

Chancellor George Osborne said the country faced "big challenges".

"But given what's happening in the world, we need a relentless focus on the economy and recent announcements on infrastructure and lending show that's exactly what we're doing," he said.

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If the figures are correct, this would be by some measure the worst four-year period for the UK, outside wartime, in at least 100 years - worse than what happened in the 1920s and 1930s, and worse than anything in the 1970s and 1980s ”

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In response, shadow chancellor Ed Balls said the "truly shocking" figures showed the government's economic plans had failed.

"If these figures don't make the chancellor wake up and change course, then I don't know what will," he said.

"Thank goodness the Olympics will give our economy a much-needed shot in the arm. But this short-term boost is not enough - we need a plan B now to get the economy moving again and radical reforms to set Britain on a new course for jobs, growth and long-term prosperity."

The ONS did point to some more positive signs for the economy. Employment is growing "modestly", it said, with 181,000 jobs created in the past three months.

With prices rising at a slower rate, the squeeze is also easing on household incomes.

However the output of the economy is still 4.5% lower than it was during its peak before the onset of the financial crisis in 2008.

Construction slump


What a muddle. On the face of it economic output has tumbled by much more than expected In the second quarter this year.

But the ONS has admitted there is a lot more uncertainty than usual because of the bad weather and the extra bank holiday.

Output is falling, yet jobs are being created in the economy, as last week's labour market data demonstrated. The business organisation the CBI says it thinks the economy is flat rather than negative.

What's really going on? We can say with certainty that the UK economy is not in a good place. As to what really happened between April and June, we may have to wait another year or more till all the revisions have taken place.

Output in the building sector fell 5.2% in the second quarter compared with the first. It is continuing to feel the effects of the economic slowdown and a sharp drop in public spending on social housing and infrastructure projects.

The ONS said the end of major Olympics projects could also be having an effect.

"This is a disaster for UK growth," said Alan Clarke, economist at Scotiabank.

"It looks like construction has done a lot of the damage," he said. "On average for the year, it's looking very unlikely that we'll be on the right side of zero growth. More likely we'll be contracting."

Production industries, which include manufacturing, decreased by 1.3%, due in part to weak demand from the eurozone, one of the UK's biggest trading partners.

The fall in services output by 0.1% surprised some, including RBS economist Ross Walker, who said he had expected the retail sector to grow during the quarter.

"We thought even with the drag from the Jubilee that we would probably just about squeeze some growth out of that sector, [but] it's contracted."

However, John Longworth, director general of the British Chambers of Commerce, said many firms were faring better than the statistics suggested.

"We're not completely convinced about the accuracy of the figures," he said. "Our business surveys and other business surveys and also the employment figures all belie what the ONS are saying about GDP and it wouldn't be the first time in history that two successive quarters have been revised upwards from negative to positive."

But he added: "Nonetheless, there's no question that the economy is, at best, stagnating."

An economy is considered to be in recession when its output has declined for two consecutive three-month periods.

The UK economy is in a double-dip recession as after a period of recession, it briefly starting growing again before a second bout of falls.

Earlier this month, the International Monetary Fund said that the UK faced "significant challenges" from a stalling recovery, high unemployment and threats from the eurozone.


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  • rate this

    Comment number 1333.

    They sorted out the economic mess in the 80's and they'll sort it out again now. How did they do it?

    Massive oil revenues from the North sea now in decline.
    Selling off our Nationalised Industries to private companies(Something that was already ours) The biggest con trick ever vested on the electorate. Nothing left to sell off.
    Letting schools and hospitals go to ruin.

    Useless idiots.

  • rate this

    Comment number 1332.

    Its all Labours' fault of course. Don't think they can use that excuse for much longer. Plan A obviously not working but they'll keep blaming them.

    the same way its al thatchers fault nearly 30 years later

  • rate this

    Comment number 1331.

    The trillions stashed by the richest could end this and save lives.
    Alternatively the 'debt' could be written-off in the name of humanity.
    Austerity? Nope - Social Engineering.

  • rate this

    Comment number 1330.

    "...we need a relentless focus on the economy and recent announcements on infrastructure and lending show that's exactly what we're doing..." - George's words above
    Are these "recent announcements" new ideas, or a u-turn, or was it 'a strategy' we hadn't been told about?

  • rate this

    Comment number 1329.

    Cameron & Osbourne do not know what it's like in the real world. To many cuts, if you keep cutting peoples jobs/raising taxes we have no money to spend on products/services to put back into the economy. Scrap plan A Osbourne it isn't working and go to Plan B - a general election....let the public decide if they still want you in power - sooner rather than later please.

  • rate this

    Comment number 1328.

    We have a whole generation who do not understand hardship. We are responsible for this and it is a worry. Life in general is about balance and we have to come to terms with the fact that we are on the other side of the mountain at present. Our country is unique in that we can and always have bounced back and we will do so again. Have faith in each other folks.

  • rate this

    Comment number 1327.


    No, that's not the problem. It was that those who couldn't pay back their loans bieng bundled with AAA raters to create the illusion that these were good buy's causing others to buy these loans at inflated prices not realising they were paying for were duds. So when the time came to collect, Uh oh! No money, it never existed in the first place! That's the root cause.

  • rate this

    Comment number 1326.


    You set a fine example, Sir!

    Buying anything other than made in UK should be stigmatised, a bit like drinking and driving.

    We, the people, need to support our own economy - we cant wait for Govt to act.

  • rate this

    Comment number 1325.

    The country is a mess, our government is a joke, but ask yourselves, are we as much to blame for our countries demise. I did this test, then our whole office of around 40 people did it, the results were shocking.
    1: How many people on your phone do you know with a drinking problem.
    2: involved in drugs.
    3:involved in any other type of criminal activity.
    4:On benefit.
    5:Avoid tax.
    Really worrying.

  • rate this

    Comment number 1324.

    Liebore borrowed and spent like there was no tomorrow and guess what ...

    That was all yesterday and - WE'RE HERE!

    Yoo-hoo - Thanks a bunch Gordo Balls Darling Bliar

  • rate this

    Comment number 1323.

    @ 1268 chrisinwinchester


    If more people could purge their minds of the Gov't & media dogma & demons they are fed & investigate for themselves the nature of the economy & the monetary structures & beneficiaries underpinning it, we could find ourselves aligned towards an actual solution - And there may be room there for a real, brave, unconventional voice to make a name for him/herself.

  • rate this

    Comment number 1322.

    1311 stuart wilson

    Clearly you are away with the fairies .

    If the BOE was not state owned the 1946 labour administration would have created their own .

    Along with any administration since .

    Its not the hidden villains causing the crisis . Its the one smiling in broad daylight .

    The only ones benefiting from this crisis are those who gain politically .

    At the moment thats ED BALLS

  • rate this

    Comment number 1321.

    Worrying that the last 1/4's figures were originally -0.2 then re-evaluated to -0.3, is this -0.7 going to be re-evaluated to -0.8 or worse? Then what about Autumns figures when all the summer and Olympic jobs have gone plus no construction work as the Olympic stadiums are all built? Just how much worse is this going to get?

  • rate this

    Comment number 1320.

    £1Tr debt isn't created by hard working employed people or the genuine people on benefits. 'where's the money?' it is the get rich quick greedy people (investment bankers, private investment companies, corporate executives) who know how to manipulate the markets and take too much out of the pot too quickly and don't pay their way. There are too many of them and it is to easy-where's the honesty?

  • rate this

    Comment number 1319.

    The EEC, UK and particularly the USA are deeply submerged in external dept amounting to trillions of Euros, GBPs and USDs. There is no way any economy is going anywhere until this dept is substantially written off. That means a depression is coming, we ain't seen nothing yet. We are now perhaps in second gear, and it is a 5 speed reverse box.

  • rate this

    Comment number 1318.

    GDP as a measure of success & prosperity is a joke-
    waste - GDP up
    car crash -GDP up
    divorce - GDP up
    murder -GDP up
    Re-use & recycling rather than buying new stuff - GDP down
    Spending time with family rather than shopping for Chinese made crap - GDP down

    Wake up folks smell the coffee!!

  • rate this

    Comment number 1317.

    No real jobs, high youth unemployment, higher than expected borrowing, deeper recession, no growth... and no clue. Everyone knows we have to cut our debt, just not everyone thinks that it should be on the backs of the ordinary joe in the street. Osbourne and co have no clue, and no real desire to change their approach to something that works. Instead, they are blaming everyone but themselves.

  • rate this

    Comment number 1316.

    1276. Cyber Tantric

    Because the right wing papers don’t like the coalition Gov’ & are out to discredit them any way they can with the support of the back benchers.
    Remember, the LibDems support the austerity measures as well & the City types were telling us there was no alternative.
    Are the back benchers supporting an alternative or just out to discredit the coalition?

  • rate this

    Comment number 1315.

    The truth is we`re BROKE...BROKER THAN fact..

    Little room for maneavore s`well...the pots empty..we could try and inflate our way out of debt..anyone ?..erm.!

    We have a decade before we`re anywhere near thru this..

    Meanwhile,understand how ..polititians are bit players..banks own the wins..

    We have socialism...we rescue the robbers with taxes..austerity.

  • rate this

    Comment number 1314.

    1307. relentles67

    It was the numpties who borrowed money off the bankers that they could not afford to repay that caused the problem - end of.....

    Same applies to governments by the way.../


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