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Shock figures put UK in recession
The UK's recovery has been dealt a major blow after shock figures showed the economy back in recession at the start of this year.
A slide in construction output and a stagnant services sector were blamed for the 0.2% decline in GDP which, after a fall of 0.3% the previous quarter, has triggered the UK's first double-dip recession since the 1970s.
Responding to the preliminary estimate from the Office for National Statistics (ONS), Chancellor George Osborne admitted the recovery was taking longer than hoped but he would not change course on his austerity drive.
Experts said the first-quarter figure, which compared with City forecasts for growth of 0.1%, painted an unduly pessimistic view of the economy and there is a danger that the UK's recession tag could damage confidence and prompt firms to rein in spending at a time when growth is needed.
Sterling fell sharply in the wake of the figures, which have opened the door to another round of money printing measures by the Bank of England. Its governor, Sir Mervyn King, has already warned that the economy might "zig-zag" in coming months, with the Diamond Jubilee and the Olympics also set to distort the figures for the second and third quarters.
Mr Osborne said: "It's a very tough economic situation. It's taking longer than anyone hoped to recover from the biggest debt crisis of our lifetime - even after the recent fall in unemployment. But over many years this country built up massive debts, which we are having to pay off."
The ONS's first estimate is compiled before more than half of the data has been gathered and some economists are hopeful that today's figure will be revised higher in coming months. The services sector, which accounts for some three-quarters of the economy, saw growth of 0.1% in the quarter, after a decline of 0.1% in the final quarter of 2011.
But the industrial production sector declined 0.4%, with manufacturing down 0.1% after a 0.7% decline in the previous quarter. The continued fall in manufacturing will come as a blow to the Government, which is hoping the sector will lead the recovery.
The construction sector saw a 3% decline in the quarter, its biggest contraction since the first quarter of 2009, although the findings contradict recent industry surveys for both the manufacturing and construction sectors. Bank of England policymakers have also said recent results from the construction sector were "perplexing".
Prime Minister David Cameron's official spokesman said: "These are clearly very difficult economic times. The figures out this morning are disappointing but it is taking longer to recover, partly because we have suffered from the biggest debt crisis in our lifetime and partly because of what is happening elsewhere in the world, and in particular in Europe. The one thing that would make the situation even worse would be to abandon our plan and deliberately add more borrowing and add to debt."