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Contraction in economy worse than first thought

Contraction in economy worse than first thought

Category: Economy

Updated: 25/02/2011
First Published: 25/02/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The UK economy contracted by more than was previously thought in the last three months of 2010.

Figures from the Office for National Statistics (ONS) show that economic output in the UK fell by 0.6% in the fourth quarter – not 0.5% as had originally been estimated.

A fall in performance in the services sector and weak output in the construction industry contributed towards the fall.

By contrast, the manufacturing sector increased by 1.1%.

Original estimates from the ONS can be revised upwards or downwards as more relevant data becomes available.

The original figures were blamed on freak weather conditions during the period, as snow shut down massive swathes of the country.

The figures will come as a disappointment to the Government, which has faced criticism for the hike in VAT and an aggressive programme of cuts to public spending.

David Kern, chief economist at the British Chambers of Commerce, said the results were disappointing.

"But we should not be despondent," he added. "There are signs that growth rebounded in the first quarter of this year, and it is important to remember that the fourth quarter figures were affected by severe weather conditions.

"Despite the disappointing data we have seen, we believe that the Government must persevere with its deficit-cutting programme.

"The economy is clearly fragile and every effort must be made to ensure that the recovery continues. The MPC must postpone interest rate increases until the initial impact of the austerity measures have been absorbed."

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