Today the Office for National Statistics announced that GDP shrank at a rate of 0.8% between in the second quarter. This is higher than the 0.3% economists had predicted.The GDP has contracted for the fifth consecutive quarter and is approaching the levels of 1980s recession.

On July 16th, IMF released the Staff Report for UK. The following is a summary of some of the key points from the report:

• The UK economy was hit hard in this crisis because of the large size of its financial sector
• The outlook is highly uncertain and deleveraging  of financial institutions and households’ balance sheets is needed
• The unemployment rate is projected to be 7.6% in 2009 and 9.2% in 2010
• Dramatic deterioration in public finances with the net public sector debt expected to reach 67.9% of GDP next year and double in the next five years
• Though British banks reported record write-downs in 2008, substantial further write-downs are expected this year and next
• Housing sector collapse is still not complete despite the foreclosure rate was only 0.35% compared to 4.25% in the U.S.
• Since the five largest British owned banks have significant international operations, their recovery is strongly related to the economies the U.S. , Western Europe and some Asian countries

Source: IMF

• The economic recovery is projected to be gradual