Page last updated at 18:25 GMT, Tuesday, 6 October 2009 19:25 UK

UK economy 'is still not growing'

A BP oil terminal in Scotland - copyright BP
The NIESR said reduced activity in the oil industry had depressed GDP

Contrary to expectations, the UK economy did not grow in the third quarter of the year, an influential economic group has predicted.

Gross domestic product (GDP) was unchanged from July to September, the National Institute of Economic and Social Research (NIESR) calculated.

Official GDP figures for the third quarter will be released on 23 October.

Many economists predicted there would be growth in the three-month period, which would end the UK recession.

The NIESR blamed the economy's failure to register any growth on weak industrial production in August, especially reduced activity in the oil industry.

Liam Byrne, Chief Secretary to the Treasury, said the NIESR's figures "seem to confirm the Chancellor's judgement that the economy will begin to grow by the end of the year".

"Today's estimates show the action we're taking to support the economy is working," he said.

The biggest risk now to economic recovery was complacency, he added.

Great prominence

The Office for National Statistics (ONS) announced earlier in the day that industrial output had unexpectedly fallen in August, dropping 2.5% from the previous month.

GDP figures are given great prominence because a recession is generally taken to be shown by two consecutive quarters when the economic output is contracting.

The NIESR points out that its forecasts tend to be within 0.2 percentage points of the first official estimate from the ONS, which means that it is likely the economy will show either a small amount of growth or decline.

It also warned that its predictions were likely to be less accurate than usual because of the "current disturbed economic circumstances".

But the forecast does cast doubt on whether the UK economy will be following France, Germany and Japan out of recession.

Even if it does not, there is likely to have been be an improvement from the 0.6% contraction seen between April and June.

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