New economic figures have confirmed fears that the UK is on track for a recession and the downturn could last for a year.
Economists had expected a fall of 20 basis points but instead Britain’s economy shrank by 0.5 per cent point in the third quarter, confirming that the UK is on the brink of a recession.
It is the first quarter of negative growth since 1992.
London’s FTSE-100 index of leading shares plunged more than 7 per cent after the figures were released before recovering slightly to end the day down 5 per cent.
The pound also took a hammering on the back of the lower-than-expected growth figures, falling to its lowest level against the US dollar in five years.
Prime Minister Gordon Brown said Britain was suffering the same fate as other countries amid the stubborn global financial crisis.
He also said the Bank of England may consider another cut in interest rates in the face of the downturn. Earlier this month, it cut rates by half a per cent to 4.5 per cent and its next decision is due on November 6.
"We’ve seen cuts in interest rates from the Bank of England. I believe that they’ll be looking at this again over the course of the next few weeks," he told the BBC.
"We’re fighting it (the current situation) every way we know how, working with other countries, trying to get the banks moving here in Britain, trying to help people with mortgages."
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