UK economy in deeper recession than previously feared

The Office for National Statistics (ONS) had originally said in its first estimate that GDP was down 0.2 per cent between January and March, plunging the UK into a double-dip recession after the economy contracted in the final quarter of 2011. The news is a further blow to the coalition government's austerity programme amid signs from the recent G8 and eurozone summits that the mood over deficit reduction was changing. This week International Monetary Fund (IMF) chief Christine Lagarde praised chancellor George Osborne for tackling Britain's deficit but urged the UK to come up with a plan B of infrastructure investment and tax reform. Driving the ONS revision today was a 4.8 per cent fall in construction output, the steepest decline in 11 years. Household spending meanwhile slowed; up 0.1 per cent in the first quarter compared to 0.4 per cent at the end of last year. But government spending - driven by health and defence - was up 1.6 per cent, the biggest rise since the first quarter of 2008. Despite the UK being back in technical recession the current downturn is not expected to be as severe as its 2008/09 counterpart, which lasted for more than a year.