25 Aug 2008

UK economy comes to a standstill

9:49 am on 25 August 2008

Economic growth in Britain ground to a halt between April and June, according to the latest official figures.

The Office for National Statistics said on Friday that the economy stalled, showing no growth from the first quarter of 2008.

It ends a run of more than 15 years of consecutive growth in the UK and will raise expectations of a rate cut.

Growth of 0.3% was recorded in the first three months of 2008.

The figures were the weakest since 1992 and the news sent the pound lower against the dollar and the euro.

The services sector, the backbone of the economy, grew 0.2%, while manufacturing output fell by 0.8%. Household spending dropped by 0.1%.

Exports also fell.

The British economy grew 1.4% from the second quarter of 2007, revised down from an initial estimate of 1.6%.

Bank of England governor Mervyn King has warned that the UK economy is in for a difficult and painful period due to a combination of high inflation and rapidly slowing growth.

Inflation is currently 4.4%- well above the bank's 2% target rate. The BoE's main interest rate is currently 5%.