Saturday, January 24, 2009

UK Economy Falls Into A Recession

LONDON -- The U.K. economy turned in its worst performance since 1980 in the last quarter of 2008, highlighting the pressures on Prime Minister Gordon Brown as his government seeks ways to ease what is threatening to be a deep and prolonged recession.

U.K. bank stocks fell and the pound touched a 23-year low against the U.S. dollar Friday after the U.K. government announced real gross domestic product -- a broad measure of economic activity, adjusted for inflation -- shrank a larger-than-expected 1.5% in the last three months of 2008 from the previous quarter.

Combined with a 0.6% decline in the third quarter, it marks the first time since 1991 that the U.K. has had two consecutive quarters of contraction, a common definition of recession. Fourth-quarter real GDP was down 1.3% from a year earlier.

The speed and breadth of the economy's deterioration make it increasingly likely that the recession will be the deepest in decades, with damaging consequences for already strained public finances and for Mr. Brown's political fortunes. The U.K. government has already put hundreds of billions of pounds into stimulus and financial bailout measures.

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