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Shock Q4 contraction for UK economy

Shock Q4 contraction for UK economy
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The harshest December weather on record meant Britain’s economy shrank by 0.5 percent in the final three months of last year.

However, even without the heavy snow, Britain’s economy would have struggled to register any growth according to the Office for National Statistics.

That assessment spooked financial markets and sent the pound tumbling against the dollar and UK shares dropped.

The British government is about to embark on deep spending cuts but finance minister George Osborne said this will not derail his austerity plans.

“This is a horrendous figure. An absolute disaster,” said Daiwa economist Hetal Mehta.

“It seems that the economy is incredibly vulnerable. And with the fiscal tightening yet to fully bite, we have to brace ourselves for a bumpy ride.”

Construction and service sector output both posted big quarterly falls.

The data is backward looking but economists said it highlighted how vulnerable growth was to negative shocks – something that will worry the government as it steps up its five-year plan to slash Britain’s budget deficit.

Osborne insisted that the shrinking economy was no reason to deviate from his programme of public spending cuts. “There is no question of changing a fiscal plan that has established international credibility on the back of one very cold month,” he said.

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