The UK economy unexpectedly contracted by 0.4% between July and September, according to official figures released by the British Government, indicating that UK is still in recession. There was a contraction by 5.2% compared to the same period in 2008, and the net figure would be 5.9% from its peak before the recession began.

Since quarterly figures were first recorded in 1950s, it is the first time that GDP (gross domestic product) of UK has contracted for six consecutive quarters in a row. Analysts consider that the recession in the UK is the longest since modern records began in the 1950s.

A quarterly GDP growth of 0.2% was expected as figures from the Office for National Statistics (ONS) showed. But the bad performance in retail sales in September and a 2.5% decline in industrial output in August made the situation worse.

soon as the GDP figures were released the pound (£) fell sharply in the market. It was down by 1.6% against the dollar at $1.6339, and down 1.7% against the Euro at 1.0878 Euros.

The sharp decline in the services sector was to blame, with the distribution, catering and hotels sectors performing badly. UK's reliance on service sector, financial services in particular, may be the reason why it is still in recession. Many millions of people are deeply concerned to see that Britain is still in recession six months after Germany, France and Japan have all come out of recession. But the decline in UK continues, with no immediate recovery in sight.

From the times of the Industrial Revolution, with a boost in heavy industries, particularly shipbuilding, coal mining, steel production, textiles and general manufacturing, the British Empire created an overseas market and continued to dominate international trade in the 19th century. But with industrialization in other countries and the economic decline after two world wars, UK began to lose its competitive edge throughout the 20th century.

Manufacturing still remains a significant part of UK economy, but accounts for only a minor part of it with the service sector now giving over 70% of GDP. The service sector is dominated by financial services, especially banking and insurance which are the worst hit by global recession. It becomes more pronounced as London is the world's largest financial centre with the London Stock Exchange, and other major international business and commerce entities based in London.

The UK government’s quantitative easing program of £175 billion will have been spent by next in the next week at the current rate of disbursal. In this context, David Kern, chief economist at the British Chambers of Commerce said, "Continued intervention - including help for businesses to access finance, and incentives to promote investment - is still needed." Financial analysts were worrying that the decline has continued despite the stimulus measures that the Bank of England have introduced.

Interestingly quantitative easing is the British central bank's policy of printing money to buy bonds from banks and other companies to stimulate the economy. The worst GDP figures may compel the Bank of England to extend quantitative easing for some more time.

On 23 January 2009, UK Government figures showed that the UK was officially in recession for the first time since 1991, starting in the final quarter of 2008. It was accompanied by rising unemployment which increased from 5.2% in May 2008 to 7.6% in May 2009. The unemployment rate among 18 to 24 year-olds has risen from 11.9% to 17.3%.

The UK has the fourth highest military expenditure in the world, total defense spending currently accounting for 2.5% of total national GDP, and as of July 2009, UK's government debt was 56.8% of GDP, unusually higher figures for a healthy economy.

One of the measures expected to be a particular help in the final quarter of the year is the change in VAT. It is due to return to 17.5% from 15% at the beginning of January.

Based on market exchange rates, the UK is today the sixth largest economy in the world and the third largest in Europe after Germany and France. There is every indication that there is no fast route to recovery for the British economy, and it is a cause of worry for all, even outside UK.