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UK economy continues to contract

2009-07-24 03:35:25

The UK economy contracted 0.8% between April and June, more than double the

figure economists had expected.

The contraction was much less than the 2.4% seen in the first quarter but was

still above analysts' 0.3% prediction.

The latest figures take the annual rate of decline to 5.6%, the biggest fall

since records began in 1955.

While an improvement on the previous quarter, the figures may indicate that the

recovery could take longer than previously had been expected.

Hetal Mehta, senior economic advisor to the Ernst & Young ITEM Club, said that

the data showed that hopes for a recovery had run ahead of reality.

"With credit still severely restricted, consumers and businesses continuing to

retrench and world trade yet to pick up, it is hard to see any grounds for

sustained optimism at the moment," he said.

The decline in economic output was driven by business services and finances, a

sector that has been hit hard by the financial crisis.

"We are clearly out of the abyss but still have a difficult time ahead," said

Brian Hilliard, economist at Societe Generale.