THE UK's economic difficulties have been laid bare with revelations of sharp falls in mortgage lending, house prices and consumer confidence, and a forecast from the Organisation for Economic Co-operation and Development (OECD) of a return to recession this quarter.

Adding to the woes, data from the Office for National Statistics showed UK productivity fell 0.5% in the fourth quarter of 2011 in terms of output per worker.

On a more positive note, ONS figures showed service sector output grew by a solid but unspectacular 0.2% in January.

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The Bank of England revealed yesterday that the number of mortgages approved for house purchase, rather than for other purposes, tumbled from 57,899 in January to 48,986 in February on a seasonally-adjusted basis.

Vicky Redwood, chief UK economist at Capital Economics, said: "This might partly be payback for the boost to approvals in January from first-time buyers beating the end of the stamp-duty holiday. But, given the holiday did not end until this month, we would have thought it should have continued to boost approvals in February."

A two-year stamp duty holiday for first-time buyers purchasing properties worth between £125,000 and £250,000 ended last week.

The Bank of England's latest credit conditions survey yesterday showed banks expect to reduce availability of mortgages and tighten lending criteria for these in the second quarter, with home loan interest rates forecast to rise further in this period.

Building society Nationwide meanwhile said that the average UK house price had fallen by 1% month-on-month on a seasonally-adjusted basis in March – the steepest monthly fall for more than two years.

The Bank of England meanwhile revealed that lending by banks to non-financial companies in the UK fell by a net £4 billion in February.

Ms Redwood said: "The overall message from [the] data was that weak bank lending is likely to remain a significant constraint on the recovery."

Chancellor George Osborne, in his Budget last week, highlighted the view of the independent Office for Budget Responsibility that the UK would grow in the current three-month period to March 31 and thus avoid a second consecutive quarter of contraction which would constitute technical recession.

But the OECD yesterday forecast UK gross domestic product would fall by a further 0.1% in the first quarter. The ONS on Wednesday revised the fall in GDP in the fourth quarter of last year to 0.3% from 0.2%.

GDP fell in three of the five quarters to the end of 2011.

Research by pollster GfK for the European Commission today, reveals the UK consumer confidence index has fallen two points this month to minus-31.

Nick Moon, managing director of social research at GfK, said: "These figures make depressing reading for the Government, especially when you consider that the index has been mired within a couple of points of the present position for the last nine months.

"Consumer confidence has returned to the weak levels of the second half of 2011."