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| Recession fear as economy shrinks | Recession fear as economy shrinks |
| (21 minutes later) | |
| The economy shrank for the first time in 16 years between July and September, confirming that the UK is on the brink of recession. | The economy shrank for the first time in 16 years between July and September, confirming that the UK is on the brink of recession. |
| Output fell by 0.5%, according to the Office for National Statistics, a bigger-than-expected drop, knocking UK shares and weakening the pound. | Output fell by 0.5%, according to the Office for National Statistics, a bigger-than-expected drop, knocking UK shares and weakening the pound. |
| The UK will be classed as being in recession if the economy slows in the fourth quarter as well. | The UK will be classed as being in recession if the economy slows in the fourth quarter as well. |
| The Chancellor voiced confidence the UK would "get through" the slowdown. | The Chancellor voiced confidence the UK would "get through" the slowdown. |
| "It will be a difficult period, but I am absolutely confident we will get through it, " Alistair Darling said in an interview with the BBC. | "It will be a difficult period, but I am absolutely confident we will get through it, " Alistair Darling said in an interview with the BBC. |
| "We want to help people get through this period, putting more money in their pockets," he said, adding that the UK needs to work with other countries to make sure these efforts are replicated around the world. | "We want to help people get through this period, putting more money in their pockets," he said, adding that the UK needs to work with other countries to make sure these efforts are replicated around the world. |
| "We have also got to make sure in the medium term we live within our means," he said. | "We have also got to make sure in the medium term we live within our means," he said. |
| He blamed the fall in UK output on the credit crunch, falling house prices and rising energy prices, which have forced consumers to tighten their belts. | He blamed the fall in UK output on the credit crunch, falling house prices and rising energy prices, which have forced consumers to tighten their belts. |
| Hard rain | Hard rain |
| Alistair Darling says he's confident 'we'll get through this' | |
| The government has failed to live up its promises of ending "boom and bust", David Cameron, the leader of the Conservatives, said. | The government has failed to live up its promises of ending "boom and bust", David Cameron, the leader of the Conservatives, said. |
| "Well, this is the day that the recession became real. We've had 10 years of being told no more boom and bust, 10 years of a government not putting aside money for a rainy day. Well that rainy day has now come," he said, calling for more support for businesses. | "Well, this is the day that the recession became real. We've had 10 years of being told no more boom and bust, 10 years of a government not putting aside money for a rainy day. Well that rainy day has now come," he said, calling for more support for businesses. |
| The Liberal Democrats called for tax cuts for the poor and more interest rate cuts. | The Liberal Democrats called for tax cuts for the poor and more interest rate cuts. |
| "These growth figures show that the credit crunch is hitting the real economy and harder and faster than was first feared," said Liberal Democrat leader Nick Clegg. | "These growth figures show that the credit crunch is hitting the real economy and harder and faster than was first feared," said Liberal Democrat leader Nick Clegg. |
| UK shares tumbled further on the news, down 7.5% in mid-morning trade. | UK shares tumbled further on the news, down 7.5% in mid-morning trade. |
| The pound was also affected, falling to $1.5889 - the first time it has fallen below $1.60 in the past five years. | The pound was also affected, falling to $1.5889 - the first time it has fallen below $1.60 in the past five years. |
| Shock fall | Shock fall |
| The 0.5% fall in economic output is far greater than predicted and increases expectations of further interest rate cuts from the current level of 4.5% to ignite growth. | |
| It is the biggest drop in UK gross domestic product (GDP) since the first quarter of 1990. What's the real impact of the economic slowdown? BBC News is taking the temperature across the UK in a special day of coverage Special report: The downturn | |
| GDP was 0.3% higher compared with the same period last year, the weakest rate of growth since the second quarter of 1992. | |
| The services sector - which represents three quarters of the UK economy - fell 0.4%, the biggest drop in 18 years. Within the services sector, hotels and restaurants saw the biggest fall, down 1.7%, compared with an increase of 0.2% in the previous quarter. | The services sector - which represents three quarters of the UK economy - fell 0.4%, the biggest drop in 18 years. Within the services sector, hotels and restaurants saw the biggest fall, down 1.7%, compared with an increase of 0.2% in the previous quarter. |
| Manufacturing output fell 1% while construction tumbled 0.8% compared to the previous quarter. | Manufacturing output fell 1% while construction tumbled 0.8% compared to the previous quarter. |
| Market fear | Market fear |
| Analysts expressed their shock at the news and their desire for aggressive rate cuts. | Analysts expressed their shock at the news and their desire for aggressive rate cuts. |
| Business group CBI said the figures were worse than expected and called for a 0.5 percentage cut in rates at the next meeting of the Monetary Policy Committee (MPC). | |
| "My comment to traders is dive, dive, dive," said Societe Generale's Brian Hilliard. | "My comment to traders is dive, dive, dive," said Societe Generale's Brian Hilliard. |
| DEFINING A RECESSION A recession is widely accepted as a decline in a country's domestic economic output or GDP for at least two consecutive quarters The layman's finance crisis glossaryQ&A: What is a recession? | DEFINING A RECESSION A recession is widely accepted as a decline in a country's domestic economic output or GDP for at least two consecutive quarters The layman's finance crisis glossaryQ&A: What is a recession? |
| "It is a very emphatic entry into recession which underlines the need for dramatic rate cuts, which we think the Bank of England will deliver." He anticipated rates dropping to 2.5% by the middle of next year. | "It is a very emphatic entry into recession which underlines the need for dramatic rate cuts, which we think the Bank of England will deliver." He anticipated rates dropping to 2.5% by the middle of next year. |
| Rates could go as low as 3% by the middle of next year and possibly even lower, said UBS analyst Amit Kara. "The risks are that this is going to be a pretty severe recession." | Rates could go as low as 3% by the middle of next year and possibly even lower, said UBS analyst Amit Kara. "The risks are that this is going to be a pretty severe recession." |
| The 0.5% drop is "truly shocking", said Vicky Redwood, at Capital Economics, adding that she expected the economy to contract for about two years in total. | The 0.5% drop is "truly shocking", said Vicky Redwood, at Capital Economics, adding that she expected the economy to contract for about two years in total. |
| Describing the 0.5% drop as "truly dire", Investec's Philip Shaw said: "News since the end of September has hardly been encouraging and the UK may well experience a recession that is significantly deeper than we had expected before." | Describing the 0.5% drop as "truly dire", Investec's Philip Shaw said: "News since the end of September has hardly been encouraging and the UK may well experience a recession that is significantly deeper than we had expected before." |
| Global slowdown | Global slowdown |
| BBC economics editor Hugh Pym says the figures raise fears we could be in for a recession very like the one in the early 1990s when unemployment hit three million. | |
| He says it is unlikely to be just a technical recession (two consecutive quarters of negative growth), but could be a year or so of negative growth. | |
| But the difference is now that interest rates are much lower, he says. | |
| The slowdown in the UK comes as fears of a global recession pummel markets around the world. | The slowdown in the UK comes as fears of a global recession pummel markets around the world. |
| The banking crisis - which has seen lending fall and banks either nationalised or taken over as they struggle with bad debt - has hit economies around the world. | The banking crisis - which has seen lending fall and banks either nationalised or taken over as they struggle with bad debt - has hit economies around the world. |
| Ireland is already in recession, France is expected to fall into recession and commentators suggest that the US - the world's largest economy and consumer of much of the world's exports - is already in recession. | Ireland is already in recession, France is expected to fall into recession and commentators suggest that the US - the world's largest economy and consumer of much of the world's exports - is already in recession. |