UK economy in worse state than feared

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UK economy in worse state than feared

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Britain fell deeper into recession than initially thought in the first quarter of this year due to a slump in construction output.

Revised figures show the economy shrank by 0.3 percent between January and March, worse than an initial estimate of a 0.2 percent decline.

That makes it more likely the UK central bank will pump additional stimulus money into the economy to protect it from the eurozone debt crisis.

Britain is in its second recession since the 2007-2008 financial crisis, and the prospects for a recovery are overshadowed by the eurozone debt problems.

The bloc is Britain’s biggest trading partner.

The Office for National Statistics said the downward revision to the Q1 data was the result of a sharp drop in construction output, which fell by 4.8 percent on the quarter, its steepest decline since the first quarter of 2009.

Household spending, meanwhile, rose by only 0.1 percent, its smallest rise in six months, suggesting that a consumer-led recovery is not likely.

The figures showed that exports also suffered. The trade deficit increased to 4.4 billion pounds (5.5 billion euros), with net trade shaving off 0.1 percentage point from GDP.

But separate preliminary data showed business investment posted its biggest quarterly rise in almost a year, and its largest annual increase in almost seven years.