U.K. economy moves closer to triple dip recession

Bank of England Adrian Dennis/AFP/Getty Images

LONDON Britain's economy contracted by a worse-than-expected 0.3 percent in the last three months of 2012, raising the possibility that it might fall back into recession for the third time since the global financial crisis.

The Office for National Statistics said Friday that there was no growth in the nation's big services industry while output of production industries fell by 1.8 percent, including a 1.5 percent drop in manufacturing.

Britain emerged from a nine-month recession in the third quarter, when GDP grew by 0.9 percent. But if the economy shrinks again in the first quarter of 2013, it will be officially back in a technical recession, defined as two consecutive quarters of economic contraction.

Howard Archer, chief economist at research firm IHS Global Insight, said in a statement Friday that Britian's economy is essentially flat-lining.

"Significantly, GDP was flat year-on-year in the fourth quarter of 2012. GDP was also flat over 2012 as a whole as a number of distortions lead to fluctuating quarter-on-quarter GDP through the year," he said.

"What is blatantly evident is that the economy continues to find it very hard to generate even modest sustainable growth," he said.

The latest figure was worse than the market consensus of a contraction of 0.1 percent, and came just two days after the chief economist of the International Monetary Fund said it was time for the government to reassess its focus on spending cuts.

"Our early advice is still very much there," Olivier Blanchard said on Wednesday. "If things look bad at the beginning of 2013, there should be reassessment of fiscal policy. We still believe that."

Treasury chief George Osborne, however, said he was not minded "to abandon a credible deficit plan."

The GDP figure released Friday is subject to revision. It was the fourth quarter of negative growth out of the past five and leaves the economy 3.3 percent smaller than it was at the start of a steep 15-month recession in 2008-2009.

All three of the major credit rating agencies - Moody's, Standard & Poor's and Fitch - have placed Britain's rating on negative watch.

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