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Shrinking UK Economy

Official figures have shown that the UK economy shrank more than expected in the final three months of 2011. This has shown that recovery is looking an even bleaker prospect, which won’t be welcome news to any of the country’s businesses, especially SMEs looking for finance for growth.

Official figures have shown that the UK economy shrank 0.4% in Q4 of 2011 as opposed to the 0.3% previously estimated. The figure for the first quarter of 2012 was unchanged, the economy still shrinking 0.3%. This shows that the double dip recession has been deeper than it was first thought.

In the same period, construction activity fell an estimated 4.9%, the sharpest decline since the first quarter of 2009. Household spending also fell 0.1% instead of growing by the same figure as it had been predicted.

And, while we may or may not have relished having the extra bank holiday for the Queen’s Jubilee, it is likely that this will have had a negative effect on GDP in the second quarter, which experts predict will be likely to shrink once more.

However, not everyone is feeling downbeat about all this negative growth. Some figures have been distorted by decline in some sectors which has balanced out the growth shown in others. Overall, as some experts believe, the picture is stronger overall than the figures would suggest. However, most still say that growth will remain close to zero for the rest of the year.

Some economists are expecting the Bank of England to restart its programme of quantitative easing, designed in particular to give the economy a boost by buying government debt which injects money into the economy. With schemes such as ‘Funding for Lending’, hopefully this will have a positive impact not only on the economy as a whole but on small business lending as well.

While the economy is in less than fantastic shape, there’s still hope. While many SMEs may find it difficult to operate in such difficult climates, many experts are hopeful that things will improve by the end of 2012.


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