UK Economy Next EU Country To Double Dip

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David Cameron went on the offensive during Prime Minister's Questions
Britain's economy shrunk in 2012's first quarter, sending the U.K. into a double-dip recession and giving ammunition to those questioning the wisdom of strict austerity measures implemented by Prime Minister David Cameron's government.

Britain's economy contracted in the first quarter, its second such consecutive decline, sending Europe's third-largest economy into a double-dip recession and giving ammunition to critics of Prime Minister David Cameron's austerity measures.

Gross domestic product fell 0.2 percent from the fourth quarter of 2011, the second quarterly drop in a row, and down from a 0.2 percent increase in the same quarter a year earlier, according to statistics released Wednesday by the nation's Office of National Statistics.

The decline fell short of the 0.1 percent of growth forecast by economists polled by Reuters.

A large drop in construction -- to the tune of 3 percent -- fueled the GDP drop. First-quarter production slipped 0.4 percent, compared with a 0.3 percent drop during the same quarter in 2011.

The dire figures fuel growing criticism of Britain's Conservative-Liberal Democrat coalition, as a broad backlash against strict austerity measures is building across Europe.

The uncomfortable fact remains that the economy is in a desperately fragile state, despite unprecedented stimulus and financial support, said Neil Prothero, U.K. economist for Economist Intelligence in London. This should come as no surprise, with the U.K. struggling to adjust to a severe (and rare) balance-sheet recession. The underlying picture is still one of very weak household consumption and business investment, exports being constrained by a stronger sterling and the inevitable escalation of the euro zone crisis, and government spending now acting as a drag on economic activity.

The second recession since 2008 puts Britain in the same class as Italy, Ireland, Spain and Portugal, all European nations to experience a double dip.

The opposition Labour Party used the results as fodder to lambaste Cameron's austerity measures, claiming ministers were cutting too far, too fast.

Cameron called the GDP drop very, very disappointing.

It is very difficult recovering from the deepest recession in living memory, accompanied as it was by a debt crisis, he said, according to the Financial Times.

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