UK approaching recession
24 October 2008 The UK economy contracted by 0.5 per cent in third quarter of the year, official figures have revealed.
According to the Office for National Statistics, the economy shrank by half a percentage point in the three months between July and September.
This represents the first time since 1992 that the country has slipped into negative growth.
Should the fourth quarter also register a negative number, then, technically, the UK will have entered a recession.
The Chancellor, Alistair Darling conceded during a television interview that the news means that "the economy, like every other country in the world, will move towards recession".
However, Mr Darling insisted that he was confident that the UK, along with other countries, "will get through this difficult period".
Richard Lambert, the CBI's director-general, called for urgent policy action and a cut in interest rates: "This figure is worse than we expected, with the slowdown spreading right across the economy.
"The government measures to support the banking system in recent weeks have shown themselves to be very necessary. Without them we would be in a far worse position.
"We must now focus on the policies that will take us forward to recovery in the future. The numbers support the view that the pace of inflation will fall rapidly. Business needs a further 0.5 percentage point cut in interest rates soon."
Mr Lambert also urged special protection for smaller businesses: "We must also find ways to stop small firms that are otherwise sound from being pushed over the brink, and to give people on the high street more money in their pocket."
David Kern, economic adviser to the British Chambers of Commerce, agreed: "The economic outlook is serious. While it is important not to talk ourselves into a slump, urgent steps are needed to alleviate the worst consequences.
"Interest rates will have to be cut without delay to 4 per cent in November, and to 3.5 per cent shortly afterwards. Business taxes will have to be cut in the Pre-Budget Report, and the government will have to insist that the vital flow of bank finance to small firms is maintained."
EEF chief economist, Steve Radley, added: "The question is not whether we are in a downturn but now how deep and prolonged it will be. Whilst pockets of industry are still holding up, large parts of the real economy are being hammered hard.
"Business and the consumer will now be looking to government and the Bank of England to step up to the plate and deliver a bold package of fiscal measures to help companies backed by further aggressive cuts in interest rates."
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