UK economy grinds to a halt

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The latest data from the Office for National Statistics (ONS) has revealed that UK economic growth ground to a halt between April and the end of June, representing the weakest performance since 1992 (the tail-end of the last recession).

Furthermore, Britain’s services sector, which makes up around two-thirds of output, grew by just 0.2% between April and June, the weakest growth since the end of 1995.

Meanwhile, manufacturing output fell by 0.8% while construction, which has suffered dramatically due to the housing market slowdown, fell by 1.1%. Household spending also fell by 0.1% during the second quarter, compared to the first quarter.

The latest figures will undoubtedly put pressure on the Bank of England to cut interest rates to prevent a protracted slowdown.

According to George Buckley, an economist at Deutsche Bank, the weak figures suggest that the UK economy is already in recession.

Last week, delivering the Bank of England’s August Inflation Report, Mervyn King said the next year is to be a difficult one, with inflation high and output broadly flat. Mr King refused to rule out the possibility of a recession.

In addition, it was revealed last week that the UK’s annual rate of inflation surged to a record high of 4.4% in July and is at its highest level since current records began in 1997.

There have been indications from UK businesses that tough times are ahead as official figures yesterday revealed that business investment fell by over £680 million between April and June as businesses anticipated a fall in demand.

A recent survey of 1,200 British companies, carried out by KPMG and the Chartered Institute of Personal Development (CIPD), revealed less than a third plan to recruit staff between July and September, compared with 37% in the period April to June.

Furthermore, the number of employers planning redundancies has risen from 22% to 27% over the same period.

John Philpott, chief economist at the CIPD, said generally the jobs market has been one of the strong areas in the UK economy, however, cracks are appearing due to an uncertain economic outlook and reports of a forthcoming recession.

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