Britain still in recession

There was hope today that it would be announced that Britain was coming out of the recession - but there's no such luck, Britain is still stuck in the worst recession on record.

In an unexpected turn, the economy unexpectedly shrank 0.4 percent in the third quarter. There was expectations in the City that it would have grown for the first time since the start of last year. Its contraction for six straight quarters is the first time since quarterly figures were first recorded in 1955, the BBC report.

Sterling, which has risen sharply in the past few days, tumbled nearly 2 cents against the dollar to US$1.6503 on the figures from the Office for National Statistics.

Gordon Brown and Alistair Darling

The news will come as a blow to Gordon Brown who has spent billions of taxpayers' money supporting the economy since the financial crisis plunged it into recession.

While Alistair Darling, the Chancellor, today said he stands by his forecast that the economy will start growing again by the end of the year.

"Our job is to support the economy as we come through towards recovery," he said.

"[Growth] will come - I'm confident about that - and I'm confident that businesses and people generally will begin to see a difference, but it will take time."

"The worst thing is that every single component of gross domestic product that was published did not rise," said George Buckley, an economist at Deutsche Bank. "It's a bad number."

Business

Britain's services sector, which accounts for the largest share of the economy, and industrial production both shrank in the quarter. The economy remains mired in the downturn despite measures designed to prevent it tipping into depression that began with the injection of GBP£47 billion into Royal Bank of Scotland and Lloyds Banking Group in October last year.

The recent uptick in houses prices and the return to profits of many City institutions had raised hopes that the worst was over. However, the Bank of England warned earlier this month that the strength of a rebound remains 'highly uncertain' given the strains still facing banks, businesses and consumers.

In Britain, the services sector, which stretches from banks to hotel and accounts for the lion's share of the economy, has stabilised. The manufacturing sector too, helped by the fall in sterling, has also brightened recently after the dramatic decline in orders that followed the collapse of Lehman Brothers.

The rate of VAT is due to return to 17.5 percent from 15 percent at the beginning of January and consumers are expected to step up their purchasing ahead of that increase.

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