British economy at weakest for 30 years

Britain’s recession-hit economy is contracting at its sharpest pace in almost three decades amid a the worst global downturn since the 1930s, official data showed on Friday.

British gross domestic product (GDP) shrank 1,9 percent during the first quarter of 2009 compared with the final three months of last year, according to the Office for National Statistics (ONS).

The data was unchanged from an initial estimate it gave last month.

GDP shrank 4,1% in the first quarter compared with the first three months of 2008, also unchanged from preliminary data, the ONS added.

Both figures matched analysts’ consensus forecasts.

“The good news is that it is looking highly likely that the first quarter will have marked the deepest rate of contraction in this recession,” said Howard Archer, chief Britain economist at IHS Global Insight.

“There are mounting signs in the latest data and surveys that the rate of economic contraction has moderated appreciably so far during the second quarter as the combination of monetary and fiscal stimulus, support to the banking sector and a very weak pound increasingly kick in to support economic activity. “Nevertheless, serious obstacles to economic recovery remain…recovery will develop only gradually in 2010, with relapses a serious threat,” Archer warned.

The British economy shrank 1,6 percent in the last quarter of 2008, while the 2009 first-quarter contraction was the sharpest since the third quarter of 1979—the year that Margaret Thatcher was elected prime minister.

Britain must hold its next general election by mid-2010, with polls indicating that the main opposition Conservatives are set to oust Labour, led by Prime Minister Gordon Brown.

Economists have in recent weeks spoken about the emergence of ‘Green Shoots’ of recovery as the world economy struggles with the worst global slump since the 1930s Great Depression.

The ONS meanwhile added on Friday that British industrial output fell 5,3% in the first quarter compared with a drop of 4,5% during the first three months of 2008.

In separate data, car production in Britain dived 55,3% in April from a year earlier, the Society of Motor Manufacturers and Traders said Friday.

“Despite the current difficulties, the United Kingdom must prepare for the return of global growth and government support for the industry is an essential part of the process,” SMMT chief executive Paul Everitt said.

Standard and Poor’s (S&P) warned on Thursday that the British economy’s top-level ‘AAA’ credit rating was under threat and revised down its outlook due to soaring public debt, sending financial markets reeling.

The international ratings agency said it downgraded the outlook to “negative” from “stable” because of the country’s “deteriorating public finances” as a result of the global recession.

S&P warned that the change could lead to a downgrade of Britain’s cherished ‘AAA’ sovereign credit rating—a mark of its financial standing in the world and a major concern in any move to raise funds.

Official data Thursday showed Britain’s public deficit ballooned to a record £8,5 billion (€9,6 billion, $13,22 billion dollars) in April as the government bailed out banks and the recession slashed tax revenues.

At the same time, public debt as a proportion of GDP jumped to 53,2% in April compared with 42,9% at the end of the same month in 2008.—AFP

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