GDP fall 'worse than expected'

The UK's Gross Domestic Product (GDP) fell by 1.9% in the first quarter 2009 - the worst drop since 1979.

Analysts had predicted that the economy's contraction would be in the region of last quarter's 1.6% decrease.

Manufacturing was the worst hit industry, with output falling by 6.2%, the Office for National Statistics revealed.

In Wednesday's Budget, Chancellor Alistair Darling said that he expected the UK economy to shrink by 3.5% this year, while the Confederation of British Industry (CBI) put the figure at 3.9%.

John Cridland from the CBI said the GDP drop "shows how grim the last three months have been".

"Looking ahead, the best we can say is that the pace of economic decline may slow in the coming months. Given that unemployment will continue rising sharply, even if businesses begin to see the rate of decline in activity starting to ease, consumers are likely to feel anxious about job prospects," he said.

The British Chambers of Commerce said the fall showed that measures announced in the Budget may not go far enough to help Britain ride out the recession, and called on the Bank of England to apply quantitative easing "more forcefully".

Deputy-director-general David Kern said: "With RPI inflation in negative territory, fears of inflation must be set aside until the deepening recession is curbed."