U.K. Economy Unexpectedly Shrinks in Longest Slump

Jennifer Ryan
Bloomberg
Friday, Oct 23rd, 2009

U.K. gross domestic product unexpectedly dropped in the third quarter as enduring slumps in services, manufacturing and construction kept the economy mired in its longest recession on record. The pound tumbled.

GDP fell 0.4 percent from the previous three months, the Office for National Statistics said today in London. Economists predicted a 0.2 percent increase, according to the median of 33 forecasts in a Bloomberg News survey. None forecast a contraction. The economy has now shrunk over six quarters, the most since records began in 1955.

The figures add to Prime Minister Gordon Brown’s woes as he struggles to cement a recovery in time for a general election due by June, and suggest Bank of England officials may need to extend their bond-purchase program on Nov. 5. Chancellor of the Exchequer Alistair Darling said today he stands by his forecast that the economy will start growing this year.

“The fact that the economy is still contracting despite the huge amount of policy stimulus supports our view that the recovery will be a long, slow process,” said Vicky Redwood, U.K. economist at Capital Economics Ltd in London and a former central bank official. “An extension to QE at the upcoming November meeting now looks even more likely.”

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