UK economy undergoing worst recession on record

As per the report released by the UK government, the country’s gross domestic product (GDP) has witnessed a 0.4 percent fall in third quarter of the year ended Sept. 30, thus defeating hopes that the economy was on the road to recovery following slowdown for five quarters in a row.

The analysts had expected at least 0.2 percent growth in the quarter, considering improvements in the housing sector and weak dollar, making exports more competitive. The quarterly figures, recorded since 1955, show that the economy had never before undergone six consecutive quarters of recession.

All sectors of the economy frail
The contraction has gripped all the sectors of the economy. The service sector has dropped by 0.2 percent and the industrial sector has witnessed a downfall of 0.7 percent during the third quarter.

The sectors that have been hard hit with 1 percent fall over this quarter are hotels, restaurants and motor trades sector. The construction industry has witnessed maximum contraction of 1.1 percent.

Countries like Germany and France had earlier this year starting showing signs of growth. But UK is not able to exit recession because the economy largely depends on service and financial sector, which have been worst affected during the economic downturn.

Decline despite continuous government assistance
The downturn had continued to persist despite government assistance to pull the economy from its worst contraction.

The government has already injected £175 billion through its quantitative easing program.

Quantitative easing is a policy whereby the government prints new currency to buy bonds from banks, institutions etc, thus adding liquidity to the economy.

The £175 billion amount is expected to be spent by next month. So this quarter will be crucial in deciding whether the government would extend its program or not.