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Estimates show UK economy shrank by 0.7% in Q2

Preliminary data from the Office for National Statistics (ONS) shows the UK economy shrank by 0.7% in the second quarter of 2012.

ONS blamed the fall primarily on sharp falls in the construction sector but said that this preliminary estimate was more uncertain than usual.

ONS said: “There are a number of factors that made the compilation of this estimate more challenging than usual.

“As part of the celebrations for the Queen’s Diamond Jubilee there were changes to the bank holidays in May and June 2012. The end of May bank holiday was moved to June, and there was an additional day’s holiday in June.

"This means that for quarter two 2012, there is one fewer working days than usual."

In addition to the change in bank holidays, the UK experienced the wettest April to June period on record. This poor weather is also likely to have had an impact on certain sectors of the economy, although it has not been formally designated as a statistical “special event”.

John Cridland, CBI director-general, said: “These are very disappointing figures. They show there has been a lack of growth in the first half of 2012.

“When I talk to businesses on the ground, however, the overwhelming view is that right now the economy is flat rather than negative, and there is potential for Britain to get back into growth later in the year.”

The drop in Q2 follows a drop in GDP of 0.3% in Q1.

Corin Taylor, senior economic adviser at the Institute of Directors, said: “The figures come as a severe blow to business.

"The Eurozone countries show that we absolutely cannot afford to waver from the deficit reduction programme, but there are several steps the Government must take to boost the economy through supply-side reforms.

"New infrastructure projects financed by our low interest rates, proper relaxation of planning and employment red tape, and action to lower energy costs for manufacturers would all show Britain means business. Too often, programmes are moving ahead at glacial speed. To help unlock corporate cash piles, Government needs to show decisive leadership and a real sense of purpose.”

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