Matt Morton- PA Wire
Hopes for an end to recession were dashed today after new figures showed the economy shrank for a record sixth quarter in a row between July and September.
The shock 0.4% third-quarter fall takes the total loss of output since the recession began last year to 5.9%, the Office for National Statistics (ONS) said.
Experts predicted a 0.2% advance for the economy, but today's figures leave the UK in the grip of the longest period of continuous decline since ONS records began in 1955.
The estimates mean the depth of the current slump is nearing the 6% decline seen between 1979 and 1981.
The persistent decline of the ailing economy comes despite interest rates at a record low 0.5% since March, economic stimulus moves from the Government and an unprecedented £175 billion boost to the money supply through quantitative easing.
Although figures such as Chancellor Alistair Darling and Bank of England governor Mervyn King expect some modest growth by the end of this year, pressure on the economy will intensify in 2010 as stimulus measures such as the temporary VAT cut and the "cash-for-bangers" scrappage scheme come to an end. Unemployment is also steadily rising towards three million.
Today's figures showed the pressure on hard-hit consumers during the period with output from distribution, hotels and restaurants down by 1%.
Overall service output, which represents almost three-quarters of the UK economy, was expected to register growth but instead disappointed with a 0.2% decline over the quarter.
The construction sector also remained in the doldrums, falling 1.1% during the period. The beleaguered industry has now contracted by a mammoth 14.7% since the beginning of 2008.
Industrial production output, meanwhile, shrank by 0.7% and is down by 13.7% since the recession began.
Today's figures have been compiled with around 40% of the required data and could be subject to changes in the next two months when more information has been gathered.
The ONS's first estimate for output between April and June was first estimated at minus 0.8%, and subsequently revised upwards to minus 0.6%.
Have free brochures on beating the recesion sent to you
The pound fell by almost 1% against the dollar and euro following today's weaker-than-expected Q3 performance. The FTSE 100 Index clung to earlier gains to stand 1% higher.
Vicky Redwood, an economist at Capital Economics, said a further extension to the Bank of England's quantitative easing programme looked even more likely at its meeting next month.
She added: "The fact that the economy is still contracting despite the huge amount of policy stimulus supports our view that the recovery will be a long, slow process.
"The economy now looks unlikely to grow by more than 1% at best next year. Similarly, with a huge amount of slack still building, we continue to think that deflation is a key risk."
Tory former chancellor Lord Lamont said: "I am not surprised by this grim figure. We have a long stony road ahead. We are living on our sovereign credit card and it cannot go on indefinitely.
"The problem ahead is that the economy is dependent on the stimulus and the stimulus cannot go on forever."
Chancellor Alistair Darling said: "I've always been clear that growth will return at the turn of year, as my Budget forecast confirmed.
"As I've repeatedly said, we're facing the worst global financial crisis and recession in 60 years. We've always said that we remain cautious as a result of the high degree of economic uncertainty.
"That's all the more reason to continue the action the Government is taking. To remove it now would be madness."
Shadow chancellor George Osborne said the figures were "deeply disappointing".
"It's clear Gordon Brown's recession plan has not worked, there is no economic leadership in this country and we urgently need a change of direction to get this country working again," he told Sky News.
"There are many millions of people who will be deeply concerned to see that Britain is still in recession six months after France and Germany came out of recession. It destroys the myth that Britain was better prepared."
Liberal Democrat Treasury spokesman Vince Cable said that despite the Government's stimulus package, the economy still faced "massive structural problems".
"This news adds to serious concerns over the realism of Government plans to deal with the burgeoning public debt. It is critical ministers spell out a credible path as to how they will deal with the deficit," he said.
"With the legacy of unemployment likely to remain for years after the end of the recession, we need radical measures to avoid repeating the mistakes of the 1990s which left millions on the scrapheap."
Mr Osborne added later in a statement: "This is deeply disappointing news. Britain is now in the deepest and longest recession in its modern history. Britain's economy is still shrinking a full six months after France and Germany started growing.
"We now know that Gordon Brown's recession plan has not worked, and this news has destroyed Labour's claim that Britain was better placed than other countries to weather the storms.
"There is now no confidence in Gordon Brown's economic policies - he has no banking plan, no debt plan and no growth plan. The whole country is suffering from this lack of leadership.
"Britain urgently needs new economic leadership - and needs it now. We need a Conservative government to get Britain working again."
During a visit to the headquarters of troubled lender Northern Rock in Gosforth, Newcastle, Mr Darling spoke of the need to continue financial support for the economy - to help it through the recession.
He said: "I have consistently said that I did not see us returning to positive growth until the turn of the year.
"Remember two years ago I said this downturn was going to be more severe and profound than many people thought.
"We are coming through the recession and I am confident we will see a return to growth.
"It is absolutely essential we continue the support we are providing to the economy, to people, to businesses. That is absolutely essential if we are to see recovery established.
"To call for the removal of that support, as the Conservatives are now doing, is absolute madness.
"I have said on many occasions that although I am confident, we need to be cautious.
"As I said a couple of days ago, we are not out of the woods yet. There is still a way to go, but I believe, provided we stick to the approach we have adopted, we will come through this and get to the recovery.
"It is absolutely essential we maintain the measures we put in place to support the economy."
Downing Street said Gordon Brown backed the Chancellor's assessment that growth would return around the end of the year.
Mr Brown's spokesman said: "Confidence is beginning to return. This has clearly been a major global financial crisis and the most difficult recession in 60 years. This reinforces the fact that that we should continue the action we are taking.
"Clearly we are hoping that the signs of confidence in the economy will continue to grow, that we are looking to see recovery towards the turn of the year."
Related links
How the UK's economy compares
Why the economy fell
The UK's recession history
The story of the recession so far
Long road to recovery
Its one thing the that the current goverment wears rose tinted glasses (which will do its best to hinder any chance of recovery) but how stupid do they think the voting public are. If they spent 5 minutes in the real world they would realise we are long way of recovery. Take off your glasses Mr brown, admit we have a big problem and then people might believe you could do something about it.
I wish people could see through the left/right paradigm. When are the masses going to realise both parties are 2 heads coming from the same monster. The dollar is collapsing faster that the controlled Demolitioned World Trade Centers, which my relative Dwight Darcy died in.
The central banks/Bilderburg group have stole trillions through create the derivatives scams and then guess what they left it to us fools to bail them out. Don't tell me I'm a conspiracy theorist. Better than being a coincidence theorist. Well guess what bad people do bad things. Do you want to follow the evidence or do you want to live in lala land that will lead to these Elite creeps telling you when and where you can go and monitor the things you do when they do what they want.
At least do your self a favour if you don't believe any of this just research things to catch up because we need to be ready to fight these fools. The money should be backed by gold. Counterfeiting money as the FED and Bank of England are doing will cause runaway inflation. Ask any reasonable Economist. Cash backed by nothing but empty promises was the biggest con committed ever. They have stolen our wealth from under our noses. A sign of tyranny is making normal things illegal. Protesting outside parliament should be our right not a privilege. Questioning our government should be a healthy sign of democracy instead you are a conspiracy theorist to ask questions which is your god given right. Imagine someone broke into your house and stole a piece of your
jewellery. You are vexed and in court after your statement is heard by the court the thief gets up and says 'Your Honour this sounds like a conspiracy theory to me' and the Judge says of how silly of me to believe in such things case dismissed.
I am totally dispondant about the whole situation,sack the lot of them and start again.
I can't believe we are worse off than the french and germans again!!!! but we are!!!