Double-dip recession deepens
The UK economy has contracted for three consecutive quarters according to new figures from the National Institute of Economic and Social Research (NIESR).
NIESR estimates that GDP fell by 0.2 per cent in the 2012 second quarter, with the extra bank holiday for the Diamond Jubilee contributing to the fall.
This follows a 0.3 per cent fall in GDP in the first quarter and a 0.4 per cent fall in the final quarter of 2011.
The organisation said that excluding the effect of the Bank Holiday, the economy may have grown by 0.2 per cent in the second quarter.
However, it warned that output remains exceptionally weak and the economy had been “broadly flat” for 24 months.
The figures are likely to lead to renewed calls for the government to change its strategy and focus on generating growth.
Meanwhile, the governor of the Bank of England, Sir Mervyn King, said on BBC Radio 4’s World at One that the debt crisis in the eurozone is still a major threat to the UK’s economy.
“There is a great black cloud of uncertainty hanging over businesses all around the world,” he said.
“The result is, until they know how this situation is going to be resolved, they are holding back from investment and spending,” he continued.
Sir Mervyn criticised EU leaders for failing to deal with the fundamental causes of the crisis and said that the delay was causing the problem to bet bigger all the time.
Official trade figures show a 7.2 per cent fall in export volumes to the eurozone over the past three months, compared with the the same quarter of 2011, while exports to the rest of the world increased by 13.2 per cent.