LONDON – The British economy has officially sunk into recession, with government figures Friday showing the economy shrank 1.5 percent in the fourth quarter of last year as the financial crisis ravaged banks, retail and manufacturing.
It was the biggest decline since the early days of Margaret Thatcher's government nearly 30 years ago.
Following the 0.6 percent decline recorded in the third quarter, Britain is now officially in recession - the standard definition of a recession is two quarters of negative growth.
The quarter-to-quarter drop in the fourth quarter came with both services and manufacturing output sharply down in the wake of the banking crisis, the seizing up of lending and already-confirmed recessions around the world, from the U.S. to Germany and Japan.
The fourth quarter drop was larger than the 1.2 percent predicted by most economists and means that the British economy contracted by more than at any time since the 1.8 percent fall recorded in the second quarter of 1980 when the then new Thatcher government reined in spending to reduce the budget deficit and hiked interest rates to rein in double-digit inflation.
The output figure released by the Office for National Statistics was 1.8 percent lower in the fourth quarter from the same period the year before.
The annual decline was the biggest since the second quarter of 1991, when output was 2.2 percent lower during Britain's last mired in recession.
For 2008 as a whole, GDP rose by 0.7 percent, down on the 3.0 percent growth in 2007, and the lowest level of growth since 1992's 0.1 percent.
The average postwar recession in Britain has lasted for around 15 months, which would, if replicated during this current downturn, mean that the country will continue contracting until the autumn of this year. However, most economists think that this recession will last longer, and possibly last well into 2010.
Earlier, Prime Minister Gordon Brown said the duration of Britain's recession depends on international action against the economic crisis.
Speaking on BBC radio, Brown didn't venture an opinion on how long the recession would last.
"It depends on the degree of international cooperation," he said.
Elsewhere, the statistics office said complications partly to do with the lowering of sales taxes in early December meant that annual retail sales comparisons using a standard seasonal adjustment was difficult. It therefore did not publish its normal seasonally-adjusted retail sales figures, which are the standard figures looked at by economists and the markets.
Nevertheless, it said unadjusted retail sales rose by 20.4 percent in December from the previous month, down from the equivalent 21.1 percent recorded in 2007. December sales figures always spike up because of Christmas shopping.