Just days after Mervyn King, the Governor of the Bank of England, confirmed that the UK was entering into a recession, figures from the Office of National Statistics reveal economic output in the UK has decreased – proving that the UK is in a recession.

Read more: “The UK is Entering a Recession,” Says King.

According to the statistics, economic output, otherwise known as gross domestic product (GDP) has fallen by 0.5% in the third quarter of 2008 - compared to a 0.0% movement in the second quarter.

The report states that weaker service industries, construction and production have been the driving force behind the shrivelling economy.

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While service industry output decreased by 0.4% compared with growth of 0.2% in the second quarter, it was manufacturing that made one of the largest contributions to the slow down - falling by 1.0% compared with a fall of 0.9% in the previous quarter.

Land transport, and post and telecommunications also made a large contribution to the economic deceleration, with all the major transport divisions showing decreased rates of growth apart from air transport.

“This is the first time we have been in this situation for 16 years, bucking the trend of 64 consecutive quarters of growth,” comments Ann Robinson, Director of Consumer Policy at uSwitch.com.

Robinson claims that disposable income has dropped by 15% for the first time since 1997 and now accounts for just 28% of gross household income - compared to 35% in 2007. With the rise in household bills and unemployment figures creeping up to 1.72 million this year and likely to hit 2 million in 2009.

“2008 has been one of the toughest years on record for UK consumers. It is understandable why consumers are panicking and reigning in their spending.”

8.3 million people have cancelled their holiday plans in the bid to save money during the credit crisis and a further 20 million people have either cut down or completely stopped taking regular trips to the pub.

Meanwhile 26 airlines have gone bust and 910 pubs ceased trading in the first six months of 2008 alone.

While consumers are trying to be sensible and rein in their finances the decline in spending is also fanning the flames of recession.

“Unfortunately, it’s the only course of action consumers can take at the moment,” continues Robinson. “They have lost confidence in the economy, the housing market and the banking sector this year - and it is too soon to tell when this confidence will be restored.”

This is the biggest fall in GDP since the first quarter of 1990 - confirming what many have thought for some time, the UK is in recession. The decelerating economy is likely to worsen the crunch on credit, which has already lost some Brits their jobs, homes and disposable income.  

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