Recession to be longest since the Second World War

Britain's longest double-dip recession for more than 50 years will be confirmed in official figures due tomorrow.

Gross domestic product (GDP) - a broad measure for the total economy - is forecast to have shrunk by around 0.2 per cent between April and June in its third quarter in a row of contraction.

That would mark the longest double-dip recession since quarterly records began in 1955 and is believed to be the worst since the Second World War.

The last double-dip recession was in the 1970s, when the economy was hamstrung amid soaring oil prices and a miners' strike, but that only lasted two quarters.

The latest decline is set to have been worsened by the extra bank holiday surrounding the Queen's Diamond Jubilee and record rainfall in April and June.

Recent estimates from the Bank of England said the celebrations could wipe up to 0.5 per cent from output, while its governor Sir Mervyn King has warned the special events including the Jubilee and the Olympics will skew figures this year.

Tomorrow's figures from the Office for National Statistics (ONS) will be a preliminary estimate and be subject to revision.

The economy entered a technical recession in the first quarter of the year, with GDP declining 0.3 per cent, following a 0.4 per cent drop in the final quarter of 2011.

This followed its five quarters in a row of falls in 2008 and 2009 from which the economy has not fully recovered.

Investec chief economist Philip Shaw, who predicts a 0.4 per cent fall in GDP, said the figures for the construction sector may be a "disaster", with falls of as much as 6 per cent between April and June, following a 4.9 per cent drop in the first three months of 2012.

The powerhouse services sector - which makes up some three-quarters of the total economy - is also on course to deliver a disappointing result following a series of weak surveys suggesting retailers failed to get a significant uplift from the Jubilee.

Yet the ONS's figures have been called into question in recent months because they are at odds with more upbeat industry surveys and improving employment figures.

Some economists have even suggested that the UK may not be back in recession at all and have voiced fears that gloomy official figures may be hitting confidence.

However, the ONS's figures are expected to show a return to growth in the current quarter, partly driven by the London Olympics.

But the recovery is set to be lacklustre for months to come, with the International Monetary Fund having recently revised down the UK's growth forecast to just 0.2 per cent in 2012, compared with its previous estimate of 0.8 per cent.

And it expects growth of just 1.4 per cent in 2013, which is much weaker than historical averages.

Howard Archer, chief UK and European economist at IHS Global Insight, who has forecast a 0.3 per cent decline in GDP in the second quarter, said the economy should bounce back with 0.6 per cent growth between July and September.

The Olympics, which kick off with the opening ceremony on Friday, should benefit the economy through ticket sales, retail trade, temporary employment, tourism and lifting consumer confidence.

Mr Archer said: "The economy should be able to achieve GDP growth in the third quarter, as it is helped by the making up of some of the activity lost to the Queen's Diamond Jubilee in the second quarter and also receives a limited overall boost from the staging of the Olympic Games."

PA