British economy officially exits recession after growing 0.1 percent in final quarter of 2009

British economy exits recession

LONDON — The British economy grew 0.1 percent in the final quarter of 2009, meaning the country officially exited recession.

Tuesday’s update from the Office for National Statistics was widely expected by economists who had pegged a return to growth after 18 months of recession.

Britain is the last of the major economies to emerge from the downturn created by the global credit crisis and economists expect growth to remain fragile for several months.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

LONDON (AP) — Official figures due out Tuesday are expected to confirm the end of Britain’s worst recession since World War II — months after most other major economies returned to growth.

Economists are expecting the Office for National Statistics to reveal that Britain’s economy grew by about 0.3-0.4 percent in the final quarter of 2009, ending an 18-month downturn.

Gross domestic product is expected to be supported by strong pre-Christmas sales as shoppers tried to beat an increase in the sales tax on Jan. 1, a government vehicle scrappage program, the revival of exports and a slow recovery in the massive services sector.

Britain was hit particularly hard by the global credit crunch because of its huge financial sector, where the government was forced to carry out a multibillion pound bailout of major banks, and higher levels of personal debt among consumers. Like the U.S., it also faced a collapsed real estate bubble.

The fallout cost the country 100 billion pounds in lost output as GDP shrank 6 percent over the 18 months of the downturn. Some 1.3 million people were laid off and around 50,000 families found their homes repossessed.

Britain is the last of the G-7 countries to exit recession, with the French and the German economies returning to growth last summer.

Signs of recovery should ease some of the pressure on Prime Minister Gordon Brown, who is heading into a campaign for a general election that must be held by the start of June.

But concerns remain over the strength of the recovery, in particular the threat of a “double-dip” recession as savage spending cuts loom and the Bank of England begins to move benchmark interest rates up from the current record low of 0.5 percent.

Many economists had previously forecast a return to growth in the third quarter of last year, and were instead caught off-guard by a shock 0.4 percent decline in the Office for National Statistics’ first estimate, later revised upward to a 0.2 percent fall.

Tuesday’s data is the first of three readings of the fourth quarter GDP. The first reading is made with around only 40 percent of the data that goes into the third and final reading.

That leaves “plenty of room for surprises,” said Investec economist David Page.

The accounting firm Ernst & Young warned that British companies should brace themselves for “a bumpy recovery.”

“Growth in the first part of the year could sit in contrast with economic stagnation or even a second dip later on,” said Keith McGregor, restructuring partner at Ernst & Young.

“The events in Dubai at the end of 2009 amply demonstrate how quickly situations can still deteriorate,” he added. “The coming years could contain more of these shocks.”

The Bank of England’s monetary policy committee will take the GDP figures into account next week when it considers whether to extend its program of purchasing assets to boost the money supply.

The 200-billion-pound program is due to be completed by early February, just before the bank’s rate setting meeting on Feb. 3-4.