Official figures are expected to show that the UK economy shrank in the first quarter of this year at the same pace that it did in the final three months of last year, which is obviously not necessarily going to be good for business.

Analysts are predicting that the gross domestic product (GDP) will have fallen by 1.5% between January and March of this year after it fell by 1.6% between October and December last year.
 
This comes after the Government announced at Wednesday’s annual Budget that the economy this year would shrink at its fastest rate since the Second World War.

This is because it is now believed that around 2.1 million people are currently unemployed, and also to do with the continued depression in the housing market as well as still weak retail sales.

It was just this January that the official term of recession – when there have been two consecutive quarters of negative growth in the economy – was met and officially accepted.

Government Being Overly Optimistic!

Simon Hayes is the chief UK economist at Barclays Capital, and said that the continued rise in unemployment, concerns over finances among other things has lead to individuals and businesses of all sizes cutting back on the amount they are allowing themselves to spend. The rate of this seems to have been quite continuous over the last six months.

Mr Hayes said: “The sharpest falls in GDP may have already happened – but we are still talking about contracting GDP and rising unemployment for the rest of the year.”

In the Budget plan for 2009 that was announced by Chancellor Alistair Darling on Wednesday, it was announced that the Government would be forced to borrow £175 billion this year in order to prevent the recession really taking its toll on the British economy.

He also said that he predicted that the economic growth would begin to grow again by the end of this year. Analysts however warn that they think this is extremely over-optimistic.

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