http://www.telegraph.co.uk/finance/financialcrisis/9225414/Britain-in-double-dip-recession-as-growth-falls-0.2pc.html
The contraction was driven by a 3pc fall in construction output, while
Britain's services sector, which drives 75pc of the economy, grew by just 0.1pc
over the period, according to the Office for National Statistics (ONS).
Most economists had predicted growth of 0.1pc, following a 0.3pc
contraction in the final three months of 2011.
The shock fall in output is a blow for Chancellor George Osborne, who has
come under intense pressure over his austerity drive.
In a statement, Mr Osborne said: "It's a very tough economic
situation. It's taking longer than anyone hoped to recover from the biggest
debt crisis of our lifetime.
"The one thing that would make the situation even worse would be to
abandon our credible plan and deliberately add more borrowing and even more
debt."
The figures also fly in the face of several closely-watched surveys that
suggested that the UK had narrowly avoided a double-dip.
Wednesday's estimate is the first of three by the ONS, and is based on just
40pc of the final data, meaning the figure could be revised up or down in the
coming months.
Vicky Redwood at Capital Economics, said: "Admittedly, the fall was
driven by a sharp fall in construction output and there are question marks over
the reliability of these numbers. That said, the drop in construction was
smaller than anticipated and even without this, output would have done no
better than stagnate. The main disappointment was the meagre 0.1% rise in
services output in Q1 - the surveys had pointed to services growth of 0.5% or
more."
The Bank of England
said last week that it could not rule out "GDP falling for three
successive quarters," because of the weak construction sector and the
extra bank holiday associated with the Queen’s Diamond Jubilee celebrations.
The contraction also provides little comfort for Britain 's outlook, with most of the
government's austerity cuts yet to come into effect.
Figures released yesterday by the ONS showed that the
government borrowed £2bn more than expected in March, but
managed to meet its full-year target because of downward revisions to previous
months.
Total borrowing for the financial year came in £11bn lower than the same
period last year, providing relief for the Chancellor who has repeatedly
restated his commitment to austerity in an attempt to drive down the deficit
and preserve Britain ’s
AAA credit rating.
Ratings agency Fitch put the UK
on negative outlook last month, meaning that there is a one in two chance that
the UK 's
credit rating will be downgraded over the next two years.
Fitch regarded the Government’s fiscal plans as “credible”, but said that
its decision to take a negative outlook reflected “the very limited fiscal space
to absorb further adverse economic shocks in light of such elevated debt levels
and a potentially weaker than currently forecast economic recovery”.
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