U.K. Economy Shrank Most Since 1980 Last Quarter, Niesr Says

U.K. Economy Shrank Most Since 1980 Last Quarter, Niesr Says

Jan. 10 (Bloomberg) -- The U.K. economy shrank at the fastest pace in almost three decades during the fourth quarter as the recession deepened, the National Institute for Economic and Social Research said.

Gross domestic product fell 1.5 percent in the three months through December, compared with a drop of 0.6 percent in the third quarter, the London-based institute, whose clients include the Treasury and the central bank, estimated in a report today. That would be the worst quarterly contraction since 1980.

“The rate of recession increased sharply in the autumn of last year,” Niesr said in a statement. “Since 1955, when quarterly figures were first produced, there have been only five quarters in which output has fallen more.”

Manufacturing extended its worst slump since 1980 in November, according to data released yesterday and factored into Niesr’s estimate. The Bank of England this week cut the benchmark interest rate to 1.5 percent, the lowest since its creation in 1694, in a bid to stem the recession.

Banks are rationing loans, starving households and businesses of credit, exacerbating the property market slump and driving up unemployment. A survey by the U.K. central bank released this month showed financial institutions plan to constrict credit further, even after the government unveiled a 50 billion-pound ($75 billion) rescue plan last year.

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