UK economy shrinks by 0.5%

Posted on January 25th, 2011 | Categories - News

The British economy has shrunk again after experiencing a small increase.

The severe weather at the end of last year may have been the cause behind the contraction of the economy.

The UK economy shrunk by 0.5% in the last quarter of 2010, according to figures revealed by the Office for National Statistics (ONS).

The contraction is disappointing given the 0.7% growth experienced in the previous three months. GDP is now a full percentage point below the predicted growth of 0.5%.

The wintry weather was cited as one of the reasons for the poor activity. However, the ONS clarified that activity would still have been “flattish” even if the impact of the weather was disregarded.

Chancellor George Osborne said that the government’s public spending cuts planned for this year will not be altered as a result of the concerning figures.

He added: “These are obviously disappointing numbers, but the ONS has made it very clear that the fall in GDP was driven by the terrible weather in December. There is no question of changing a fiscal plan that has established international credibility on the back of one very cold month. That would plunge Britain back into a financial crisis. We will not be blown off course by bad weather”.

Two further statistical reports will be revealed by the ONS in the next couple of months.