SLUMP DEEPENS –Coalition vows to continue permanent austerity


THE SLUMP deepened dramatically in the UK in the year’s second quarter. Official figures showed yesterday that output fell by a startling 0.7% between April and June.

ons (Office of National Statistics) figures show the UK economy has now contracted for three quarters in a row, making it the longest double-dip recession and slump since quarterly records began in 1955.

It is actually the longest slump since the 1930s.

The 0.7% contraction was much bigger than expected and followed a 0.3% drop in the first three months of the year.

Output in Britain’s service sector – which makes up more than three quarters of GDP – contracted by 0.1% in the second quarter after growing 0.2% in the first quarter.

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

The ONS said the fall was largely due to the slowdown in the construction sector, but for good measure blamed the weather and the extra June bank holiday.

‘This is terrible data. Frankly there’s nothing good that comes out of these numbers at all,’ said Peter Dixon, an economist at Commerzbank.

‘The economy looks to be badly holed below the water line at this stage. It’s a far worse period of activity than we’d expected,’ he said.

‘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.’

RBS economist Ross Walker said he had expected the retail sector to grow during the quarter. ‘The main disappointment is the services number,’ he said.

‘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.’

Chancellor Osborne said that although the figures were ‘disappointing’, there would be no change in course.

‘We’re dealing with our debts at home and the debt crisis abroad,’ said Osborne.

Shadow chancellor Balls pleaded for policy change, saying: ‘If these figures don’t make the chancellor wake up and change course, then I don’t know what will.’

TUC General Secretary Brendan Barber complained: ‘The government’s austerity strategy is failing so spectacularly that it has wiped out the recovery completely.’