LONDON - The U.K. economy shrank more than previously estimated in the first quarter in the biggest contraction since 1958 as the recession choked industries from construction to services.
Bank of England Governor Mervyn King said last week that Britain's recovery from recession may turn out to be "a long, hard slog." While business surveys have indicated the economic slump is easing, unemployment may continue to increase and net mortgage lending has slowed to the weakest pace since records began in 1993.
"The best the U.K. can hope for is a very muted, mild recovery," said James Knightley, an economist at ING Financial Markets in London. "Unemployment still rising and credit is still restricted. We could get more of a rebound in third quarter."
The drop on the quarter was the biggest since the year that Michael Jackson was born, when Harold Macmillan was prime minister and Jerry Lee Lewis released "Great Balls of Fire." The contraction matched the 2.4 percent drop in the third quarter of 1979 after rounding, though it exceeded it by 0.04 percentage point, the statistics office said. On the year, GDP dropped 4.9 percent, the most on record.
Construction slumped by 6.9 percent on the quarter, revised down from a drop of 2.4 percent published in May. The services decline was 1.6 percent, revised from a 1.2 percent drop. U.K. financial services companies may cut 13,000 jobs in the third quarter, the Confederation of British Industry said.