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UK GDP: Economy shrank at end of 2012 UK GDP: Economy shrank at end of 2012
(35 minutes later)
The UK economy shrank by 0.3% in the last three months of 2012, further fuelling fears that the economy could re-enter recession.The UK economy shrank by 0.3% in the last three months of 2012, further fuelling fears that the economy could re-enter recession.
The Office for National Statistics (ONS) said the fall in output was largely due to a drop in mining and quarrying, after maintenance delays at the UK's largest North Sea oil field.The Office for National Statistics (ONS) said the fall in output was largely due to a drop in mining and quarrying, after maintenance delays at the UK's largest North Sea oil field.
The economy had grown by 0.9% in the previous quarter, boosted by the London 2012 Olympic Games.The economy had grown by 0.9% in the previous quarter, boosted by the London 2012 Olympic Games.
For the whole year, growth was flat.For the whole year, growth was flat.
The ONS said that the "bumpy economy" was on a "sluggish trend".The ONS said that the "bumpy economy" was on a "sluggish trend".
Manufacturing fell by 1.5% in the fourth quarter, the services sector was flat, but construction output rose by 0.3%.Manufacturing fell by 1.5% in the fourth quarter, the services sector was flat, but construction output rose by 0.3%.
Within the manufacturing sector, mining and quarrying output fell by 10.2%, the biggest decline since records began in 1997, driven by disruption to North Sea oil and gas fields.Within the manufacturing sector, mining and quarrying output fell by 10.2%, the biggest decline since records began in 1997, driven by disruption to North Sea oil and gas fields.
If oil and gas extraction were excluded from the overall gross domestic product (GDP) calculations, then the data would have shown that the economy shrank by only 0.1% in the fourth quarter, the ONS said.If oil and gas extraction were excluded from the overall gross domestic product (GDP) calculations, then the data would have shown that the economy shrank by only 0.1% in the fourth quarter, the ONS said.
GDP is the sum of all goods and services made in the economy.GDP is the sum of all goods and services made in the economy.
'Difficult road' 'Difficult situation'
This is the first estimate of how the economy performed in the fourth quarter, and is subject to at least two further revisions as further data is collected. This is the first estimate of how the economy performed in the fourth quarter, and is subject to at least two further revisions as more data is collected.
"It confirms what we already knew - that Britain, like many European countries, still faces a very difficult economic situation," the Treasury said in a statement. Chancellor George Osborne said the figures were a reminder that the UK faces "a very difficult economic situation".
He described them as "a reminder that last year was particularly difficult, that we face problems at home with the debts built up over many years, and problems abroad with the eurozone, where we export many of our products, deep in recession."
"Now we can either run away from those problems or we can confront them. And I'm determined to confront them so we can go on creating jobs for the people of this country," Mr Osborne said.
But Labour's shadow chancellor Ed Balls said: "Today's news confirms what business leaders, retailers and families have known for many months - that depressed confidence and a chronic shortage of demand mean our economy continues to flat line.
"This government's failing plan has now seen our economy stagnate for over two years and borrowing is now rising as a result."
Frances O'Grady, general secretary of the TUC, said: "We are now mid-way through the coalition's term of office and its economic strategy has been a complete disaster.
"The economy has grown by just 1%, real wages have fallen, and the manufacturing and construction sectors have shrunk. We remain as dependent on the City as we did before the financial crash."
'No positives'
One thing is clear - yesterday's market rumours of a leak of the GDP data with a positive figure were misguided.One thing is clear - yesterday's market rumours of a leak of the GDP data with a positive figure were misguided.
The fall of 0.3% in the fourth quarter was more or less in line with expectations, although many analysts thought it might be closer to zero.The fall of 0.3% in the fourth quarter was more or less in line with expectations, although many analysts thought it might be closer to zero.
The ONS pointed out that North Sea maintenance had hit oil and gas extraction, and that excluding that the slide in output was 0.1%. Construction, previously a section of the economy on the slide, was back in positive territory with a rise of 0.3%. But the dominant services sector was flat with a post Olympic hangover.The ONS pointed out that North Sea maintenance had hit oil and gas extraction, and that excluding that the slide in output was 0.1%. Construction, previously a section of the economy on the slide, was back in positive territory with a rise of 0.3%. But the dominant services sector was flat with a post Olympic hangover.
In the words of the ONS, the underlying picture was flat over 2012, with the economy working well below its potential.In the words of the ONS, the underlying picture was flat over 2012, with the economy working well below its potential.
"While the economy is healing, it is a difficult road."
But Jonathan Portes, an economist from the National Institute of Economic and Social Research, said there was a "co-ordinated policy failure across Europe".
"Underlying it, ignoring all the special factors, what we see is the economy is not delivering the sustainable growth that we would normally see at this point in the cycle," he told the BBC.
"This is due to the [UK] government's policies and the failure of governments in the eurozone.
"They should not have cut the deficit so quickly and before the recovery was sustained."
'No positives'
The CBI business group said it expected growth "to continue to be fairly flat through the winter but momentum will gradually build later in the year, as the global economy picks up a little and confidence lifts".The CBI business group said it expected growth "to continue to be fairly flat through the winter but momentum will gradually build later in the year, as the global economy picks up a little and confidence lifts".
Lee Hopley, chief economist at EEF, the manufacturers' organisation, said there were "no positive takeaways" from the figures.Lee Hopley, chief economist at EEF, the manufacturers' organisation, said there were "no positive takeaways" from the figures.
"Even assuming some unwinding of activity from the Olympics boost in the previous quarter, this still leaves no real signs of underlying growth in the economy."Even assuming some unwinding of activity from the Olympics boost in the previous quarter, this still leaves no real signs of underlying growth in the economy.
"The news from industry was particularly weak, with November's sharp drop on output contributing to a rather grim fourth quarter and leaving the overall picture for manufacturing in 2012 the weakest since 2009.""The news from industry was particularly weak, with November's sharp drop on output contributing to a rather grim fourth quarter and leaving the overall picture for manufacturing in 2012 the weakest since 2009."
Economists at IHS Global Insight noted that GDP in the fourth quarter of 2012 was 3.3% below the peak level seen in the first quarter of 2008. They estimate that it will not return to that level until the first half of 2015 - a gap of seven years.Economists at IHS Global Insight noted that GDP in the fourth quarter of 2012 was 3.3% below the peak level seen in the first quarter of 2008. They estimate that it will not return to that level until the first half of 2015 - a gap of seven years.
FallbackFallback
The after-effects of the Olympics and Paralympics was evident in the services sector.The after-effects of the Olympics and Paralympics was evident in the services sector.
Services make up about three-quarters of the UK's economic activity. In the third quarter, the sector grew by 1.2%.Services make up about three-quarters of the UK's economic activity. In the third quarter, the sector grew by 1.2%.
The ONS said there was some evidence of "fallback" in the fourth quarter, seen in the hotel and restaurant industries and in land transport.The ONS said there was some evidence of "fallback" in the fourth quarter, seen in the hotel and restaurant industries and in land transport.
The biggest impact, though, was in sports activities, amusement and recreation, which dropped 22.5%, and contributed 0.2 percentage points to the fall in overall GDP.The biggest impact, though, was in sports activities, amusement and recreation, which dropped 22.5%, and contributed 0.2 percentage points to the fall in overall GDP.
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