Britain is now experiencing its longest recession on record, new figures have revealed.


LONDON, UNITED KINGDOM (OCTOBER 23, 2009) ITN - Britain's economy contracted in the third quarter of this year, quashing hopes the downturn was ending and instead marking the longest recession on record, figures released on Friday (October 23) revealed.
Sterling plunged more than a cent against the dollar and government bonds surged as traders and analysts bet the Bank of England (BoE) was more likely to expand its quantitative easing programme of buying up debt market assets to secure a recovery.

Friday's figures are also a blow to Prime Minister Gordon Brown's Labour government, trailing in opinion polls and hoping for recovery to take hold well before an election due by next June.

The Office for National Statistics (ONS) said British gross domestic product fell by 0.4 percent between July and September, meaning the economy has contracted for six successive quarters for the first time since records began in 1955.

This was much worse than analysts' expectations of a 0.2 percent rise. Not a single analyst out of the 35 polled by Reuters before the data had predicted a negative reading.

Japan, Germany and France all pulled out of recession in the second quarter and economists expect the United States to have returned to growth in the third.

The data will pose a major challenge for the BoE when it reviews its growth and inflation forecasts in early November and analysts remain divided over whether the bank will expand its 175 billion pound quantitative easing scheme.

August's forecasts showed the BoE would meet its inflation target over the medium term, but this was based on an annual economic decline of only 4.6 percent in Q3. Friday's figures show a 5.2 percent fall, only marginally better than the record 5.5 percent annual fall registered in the second quarter.

British finance minister Alistair Darling said he still expected growth to return by the turn of the year, reiterating a forecast made in the budget in April. Darling will update that forecast in the pre-Budget report due in the next few weeks.

"I've consistently said we need to be cautious. We're not out of the woods yet. But what I'm very certain about is that confidence is beginning to return and we need to keep in place the support the government's been giving to people and to businesses. To remove it now would be utter madness," he said.

But Darling's Conservative counterpart, George Osborne, said Germany and France's better economic performance showed government policy had failed.

"I think many people in the country will be extremely concerned now that we are in the longest and deepest recession since the Second World War. It's clear that (British Prime Minister) 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."

The ONS said there had been a peak-to-trough GDP fall of 5.9 percent during the current recession, compared to 6.0 percent between the second quarter of 1979 and the first quarter of 1981 -- a period when there were some quarters of growth.