UK enters recession as output falls 1.5%

The UK has officially entered recession today after official data confirmed the output of the economy fell by 1.5% in the last quarter of last year.

This follows a fall of 0.6% in the third quarter of 2008 meaning the economy has now suffered two consecutive quarters of negative growth – the official definition of a recession.

Today’s fall is worse than expected with commentators predicting a 1.2% fall. It is the steepest quarterly fall since 1980, with the decline led by a steep drop in manufacturing output. The construction sector fell by 1.1%, the third consecutive quarter of decline.

Most worrying for construction companies was the record of government and public sector business on which many in the sector are pinning their hopes. The survey recorded that the output of “government and other services” fell by 0.5%, despite government pledges to use public spending to stave off the worst effects of recession.

The consensus total output forecast is for a decline of 2.1% over the course of 2009.

Robin Hardy, housebuilding analyst at KBC Peel Hunt, said the figure was higher than predicted, but still within the bounds of expectation. He said: “This has been so well flagged for such a long time that it's no real shock.”

He said markets would have been shocked if the fall in the fourth quarter of 2008 was much above 1.5%.