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| Recession fear as economy shrinks | Recession fear as economy shrinks |
| (10 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. |
| Alistair Darling says he's confident 'we'll get through this' | Alistair Darling says he's confident 'we'll get through this' |
| "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. |
| 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. |
| Charlie Bean, deputy governor of the Bank of England's rate-setting committee, the MPC, described it as a" once in a lifetime crisis and possibly the largest financial crisis of its kind in human history." | Charlie Bean, deputy governor of the Bank of England's rate-setting committee, the MPC, described it as a" once in a lifetime crisis and possibly the largest financial crisis of its kind in human history." |
| UK shares tumbled further on the news, down 7% in early afternoon trade. | UK shares tumbled further on the news, down 7% in early afternoon 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. | 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 | 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. | 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 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." |
| Return to 1990s? | Return to 1990s? |
| 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. | 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. | 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. | But the difference is now that interest rates are much lower, he says. |
| Deputy bank governor Charlie Bean told the Scarborough Evening News that the bank's independence - and ability to set monetary policy - meant that the UK was in a better position than in the early 1990s. | Deputy bank governor Charlie Bean told the Scarborough Evening News that the bank's independence - and ability to set monetary policy - meant that the UK was in a better position than in the early 1990s. |
| Hard rain | Hard rain |
| Opposition politicians criticised the government for its handling of the financial crisis. | Opposition politicians criticised the government for its handling of the financial crisis. |
| "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," 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," David Cameron, the leader of the Conservatives, said. |
| 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. |