UK economic growth at standstill

UK economic growth ground to a halt between April and June, according to the latest official data.

The Office for National Statistics said economic growth was unchanged in the second quarter from the first, revising an earlier estimate of 0.2% growth.

It ends a run of 63 consecutive quarters of growth in the UK and is the weakest data since 1992.

The figures are likely to raise expectations of a cut in interest rates to prevent a protracted slowdown.

The services sector, the backbone of the UK economy, grew just 0.2%, while manufacturing output fell by 0.8%. Household spending dropped by 0.1%.

Exports also fell as Europe, the UK's main trading partner, saw growth contract in the same period.

The economy grew 1.4% from a year earlier, revised down from an initial estimate of 1.6%.

"The figures are very weak and suggest the UK economy is already in recession," said George Buckley, an economist at Deutsche Bank.

The economy technically enters a recession when it shrinks for two consecutive quarters.

Rate dilemma

Bank of England governor Mervyn King has warned that the UK economy is in for a difficult and painful period due to a combination of high inflation and rapidly slowing growth.

Inflation, which hit 4.4% in July, could make it more difficult for the Bank to cut interest rates to spur the economy but analysts said the zero growth reading could lead to lower borrowing costs by the end of this year.

"This really does put a rate cut firmly on the agenda although it is unlikely to come until we have seen the peak in inflation," said Brian Hilliard, an analyst at SG.