UK economic growth slowed to a standstill between April and June this year, for the first time since the country last experienced a recession 16 years ago.

The facts:

Revised official figures published today are the most graphic illustration yet that the UK is heading for a full-blown recession. An earlier assessment put growth at 0.2 per cent for the second quarter, but a rethink by government statos reduced it to zero.

Over the year the economy grew by just 1.4 per cent – revised from 1.6 per cent – the slowest annual growth rate since the last part of 1992. Since that date there have been 63 quarters of unfettered growth.

The news will lump pressure of the Bank of England’s Monetary Policy Committee to cut interest rates when it next meets in September. The Bank has hinted that it will reduce rates, but it may not make a move soon because of rising inflation.

Closer inspection of the figures show the service sector, the UK’s economic powerhouse, creeping along at 0.1 per cent. Manufacturing slumped 0.8 per cent and household spending shrank 0.1 per cent.

They said:

"This really does put a rate cut firmly on the agenda although it is unlikely to come until we have seen the peak in inflation," said Brian Hilliard, an analyst at Societe Generale.

"The figures are very weak and suggest the UK economy is already in recession," said George Buckley, economist at Deutsche Bank.

David Kern, economic adviser to the British Chambers of Commerce, said: "Given the heightened threats of UK recession it is vital that the MPC starts cutting interest rates in October or November, as soon as it is clear that CPI inflation has peaked."

We say:

Interest rate cuts by the Bank of England can only do so much to improve the fortunes of UK small businesses. Forget about what policymakers are doing and focus on your core business.

This recession will be shallow, according to most analysts, and many small businesses continue to report strong growth. So it’s not all bad news!

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By News Desk  on   Aug 22,2008

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Keywords

recession    economy    growth    smalll business    BCC   

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