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Britain's economy shrinking quickly

THE British economy contracted a little more than previously estimated in the last three months of last year as households looked to pay down their soaring debt levels, official figures released yesterday showed.

The Office for National Statistics said gross domestic product in the October-December quarter declined by 1.6 percent from the previous three month period. The statistics office had predicted a 1.5-percent drop.

The quarterly decline was the biggest since the second quarter of 1980, when output slumped by 1.8 percent.

On an annual basis, British GDP fell 2.0 percent, again higher than the 1.9 percent previously estimated. The annual fall was the biggest since 1991 when Britain was last mired in recession.

The statistics office said all major segments of the economy, including the dominant services sector, saw output decline during the fourth quarter.

Most economists reckon the British economy will continue to contract for most, if not all, of this year, despite massive interest-rate reductions, a big fiscal package and falling energy prices. Some are even predicting the British economy may slump by 4 percent.

GDP growth for the whole of last year was left unrevised at 0.7 percent.

Despite the wide-ranging gloom within the figures, analysts were encouraged that the savings ratio increased from 1.7 percent of income to a historically normal level of 4.8 percent as households reined in their consumption to pay off their debts.

High personal debt levels are considered to be one of the main reasons why the British economy is getting battered so hard.


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