LONDON - The British economy contracted the most since 1980 in the fourth quarter as the crisis prompted spending by consumers and companies to shrivel.
Gross domestic product fell 1.5 percent from the third quarter, matching the previous estimate, the Office for National Statistics said yesterday. Consumer spending fell 0.7 percent on the quarter, the most since 1991, while fixed investment dropped 2.3 percent.
The economy needs additional stimulus to stem the recession and head off the risk of deflation, Bank of England policy maker Andrew Sentance said Tuesday. The government may announce further measures this week to support banks including Royal Bank of Scotland Group.
"The overall picture is very gloomy,'' said Philip Shaw, an economist at Investec Securities in London. "Our suspicion is that the bank will reduce rates again. We'll see a further 50 basis point cut next week."
The central bank will take its next decision on March 5. Policymakers have already cut the benchmark interest rate to 1 percent and have signaled they want the power to create money to help stimulate the economy.
Vodafone Group, the world's largest mobile-phone company, will cut 500 jobs as customers curb spending. Barratt Developments, the U.K.'s second-biggest homebuilder by volume, yesterday wrote down the value of land holdings and unfinished stock by 495 million pounds ($719.4 million).