UK growth negative for first time since 1992

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The Independent Online

Britain will officially move closer to recession this week, leading economists warned yesterday, with the Government set to reveal the first fall in economic output since the second quarter of 1992.

The Office of National Statistics will on Friday give its first estimate of the UK's economic growth during the third quarter of the year and is expected to announce a negative figure.

While the ONS cannot yet officially call a recession – the technical definition is two successive quarters of negative growth and the second quarter figure was 0 per cent – it has become increasingly clear the UK economy has now begun to shrink.

"A slump in manufacturing means that with data available up to August, industrial production may have tumbled by 1.3 per cent over the third quarter," warned Philip Shaw, chief economist at Investec.

"Meanwhile, construction activity is likely to have declined more rapidly than the 0.5 per cent recorded in the second quarter, while a deterioration in service sector surveys implies the sector will be struggling to match growth of 0.2 per cent during the previous quarter. Overall we are forecasting GDP fell by 0.2 per cent over the period." That projection is in line with a warning today by the Ernst & Young Item Club, which now expects three more quarters of falling growth.

The group's chief economist, Peter Spencer, warned that there was little reason to be optimistic, even with the credit crisis now appearing to be easing."We have to face up to the fact that in the UK and many other countries we are entering a recession," he said.

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