LONDON: A slump in construction output drove Britain even deeper into recession than initially thought in the first quarter of this year, raising the chance the Bank of England (BoE) will inject more cash to prop up the faltering economy.
More is also expected to be needed to protect the economy from the worsening euro zone crisis. Britain is in its second recession since the 2007-2008 financial crisis, and the prospects for a recovery are cloudy as leaders in the euro zone, Britain's biggest trading partner, have made little progress in resolving their debt woes.
The BoE's Monetary Policy Committee (MPC) has indicated it is ready to pump more money into the economy, having paused its asset-buying quantitative easing (QE) programme this month, amid growing worries about a break-up of the currency union.
"The economy is not recovering properly and with the uncertainty over Europe hanging over the outlook as well, our suspicion is the MPC will sanction further QE at some point later on this year," said Philip Shaw, economist at Investec.
Britain's economy contracted by 0.3 per cent between January and March, according to the Office for National Statistics, confounding forecasts for an unchanged reading of -0.2pc. On the year, GDP shrank by 0.1pc, the first annual decline since the fourth quarter of 2009.
The figures will make uncomfortable reading for British Finance Minister George Osborne, who has vowed to press ahead with harsh austerity measures to curb Britain's debts, despite mounting criticism that spending cuts will stymie a recovery.
Britain's economy has expanded by just 0.3pc since the Conservative/Liberal Democrat government came to power in 2010, and yesterday's figures showed government spending made the biggest positive contribution to the economy, but it is a prop that will soon fall away.
Faced with growing calls to find ways to boost growth, the finance ministry is looking for measures to channel cash into infrastructure projects and credit-starved companies.
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