Construction slump drove UK deeper into recession this year
A SLUMP in construction output drove the UK even deeper into recession than first thought in the first quarter of 2012, raising the chance that the Bank of England will inject more cash to prop up the faltering economy.
Britain is in its second recession since the 2007-2008 financial crisis, and the prospects for a recovery are cloudy as leaders in the eurozone, Britain's biggest trading partner, have made little progress in resolving their debt woes.
The UK is Ireland's largest trading partner and our neighbour's slide into recession mirrored our own return to recession last year.
The BoE's Monetary Policy Committee has indicated it is ready to pump more money into the economy, having paused its asset-buying quantitative easing programme at £325bn this month, amid growing worries about a break-up of the currency union.
"The economy is not recovering properly and with the uncertainty over Europe hanging over the outlook as well, our suspicion is the MPC will sanction further QE at some point later on this year," said Philip Shaw, economist at Investec.
Britain's economy contracted by 0.3pc between January and March, according to the Office for National Statistics, confounding forecasts for an unchanged reading of -0.2pc. On the year, GDP shrank by 0.1pc, the first annual decline since Q4 2009.
The figures will make uncomfortable reading for British chancellor of the exchequer George Osborne, who has vowed to press ahead with harsh austerity measures to curb Britain's debts, despite mounting criticism that spending cuts will stymie a recovery.
Britain's economy has expanded by just 0.3pc since the Conservative/Liberal Democrat government came to power in 2010, and yesterday's figures showed government spending made the biggest positive contribution to the economy, but it is a prop that will soon fall away.
The IMF this week warned about the risks facing Britain and urged policymakers to boost growth by any means necessary. It said the BoE could cut rates further. (Reuters)