Britain still in recession despite GDP revision

Britain remains in its longest double-dip recession since the 1950s, despite a revision of the second quarter figures for economic output.

The third estimate by the Office for National Statistics indicated gross domestic product (GDP) fell by 0.4 per cent in the period, compared with the second estimate of 0.5 per cent and the original figure of 0.7 per cent.

While the estimated decline in the service sector remained the same, manufacturing, production and construction output were all judged to have fallen less than previously thought.

Despite this, the reduction in GDP still leaves the UK in the doldrums and although the third quarter is likely to show growth due to the inclusion of receipts from the sales of 11 million Olympic and Paralympic tickets, it remains to be seen whether the economy can resume growth without the benefit of such one-off boosts.

People struggling with debt repayments will hope it can do, as more economic shrinkage could cause unemployment to start rising again.

This could make it harder for consumers to make repayments on what they owe due to the loss of incomes that would arise from the consequent plunge in income.

In recent months the employment figures have defied conventional economic wisdom by improving, with the latest data indicating a net rise of 236,000 people in work over the three months to July, while the number classed as unemployed fell by 7,000.

Commenting on the situation, Royal London Asset Management economist Ian Kernohan said: "The puzzle remains as to why employment is rising while growth in the economy remains so weak."

He did, however, express optimism that the economy will enjoy a "sizeable bounce" in the third quarter and said the extent of economic shrinkage in the second quarter meant all or most of the drop in GDP was due to the extra jubilee bank holiday.

By James Francis