by: David Milliken & Olesya Dmitracova
July 26, 2012
[Reuters] – Britain’s economy shrank far more than expected in the second quarter, battered by everything from an extra public holiday to government spending cuts and the neighbouring euro zone crisis.
Chancellor George Osborne said figures released on Wednesday showed Britain had “deep-rooted economic problems,” adding that the slump in the second quarter was disappointing even when taking into account one-off factors that hurt.
Britain’s gross domestic product fell 0.7 percent from the first three months, the sharpest drop since the height of the global financial crisis in early 2009, the Office for National Statistics said, showing a bigger drop than any of the economists surveyed in a Reuters poll last week had expected.
Output in Britain’s service sector — which makes up more than three quarters of GDP — contracted by 0.1 percent in the second quarter after growing 0.2 percent in the first quarter of 2012.
Industrial output was 1.3 percent lower, while construction – which accounts for less than 8 percent of GDP – shrank by 5.2 percent, its biggest drop since the first quarter of 2009.
The figures confirmed that Britain remains mired in its second recession since the start of the financial crisis, with the economy shrinking for a third consecutive quarter.
The broad-based slump will fuel pressure on the government to get the economy growing again after a crisis that has left many Britons poorer with rising prices and higher taxes eating up meagre wage increases.