UK economy closer to recession

The UK economy shrank by 1% in the two months between September and November, figures from the National Institute of Economic and Social Research (NIESR) suggest.

The data suggests the UK is well on its way to meeting the technical definition of a recession, which is two consecutive quarters of negative growth.

There was a 0.5% drop in the three months to the end of September but figures for the final quarter of 2008 will not be released until January. NIESR suggests all the evidence points to a fall of more than 1%.

"The government faces the real risk that, despite the measures it took in last month's Budget, output will fall more sharply than it expected to the end of next year," the group said.

"The main problem that it needs to address very urgently is the availability of bank credit, and further interest reductions are unlikely to have much effect."