The British economy shrank during the third quarter of this year, figures from the Office for National Statistics (ONS) have shown.

As such, analysts have warned that the country has moved one step closer to a recession. Such a scenario is commonly defined as two consecutive quarters of negative economic growth and has been unseen in Britain for 16 years. As such, todays (September 24th) figures have put an end to 64 consecutive quarters of increasing gross domestic product (GDP).

While the figures from the ONS are provisional and are subject to revision, key indicators suggest that real GDP declined 0.5 per cent, down from zero per cent growth recorded for the second quarter. In particular, there was a sharp downturn in activity in the services sector, although the production and construction industries also shrunk. Within the services sector, the decline was driven by poor takings in distribution, hotels and restaurants, business services and finance.

The falls in this sector had a particularly heavy downward pressure on the overall real GDP decline as in total, the services industry accounts for 75 per cent of UK economic activity. Distribution, hotels and restaurants alone account for 15 per cent of the economy.

For those who are worried about financial security as the economy contracts, taking out a debt consolidation loan may allow people to address repayment commitments over a longer period, thereby potentially deleveraging household finances and allowing them to begin putting money aside for the future.

Commenting on the GDP report, uSwitch noted that 2008 has been a tough year for consumers as inflation has soared and disposable income has shrunk.

The group said in a statement: “At the moment it really does seem that every penny counts for consumers. We have seen 8.3 million people cancel holiday plans alone – meanwhile 26 airlines have gone under already this year with 30 more casualties predicted. At the same time 20 million people (43 per cent) have either cut down or completely stopped taking regular trips to the pub – but the knock-on effect has been that 910 pubs ceased trading in the first six months of 2008 alone. In total, consumers have already saved 2.7 billion pounds by making these small cut backs.”

Meanwhile, it also noted that 42 per cent of Britons have cut back on insurance cover in a bid to limit their outgoings. As such, the price comparison site warned that as many as 19 million people may have reduced their financial security – or discarded it entirely. In the event that people find they are left underinsured in areas such as house or car cover, it is possible that they will have to rely on savings or homeowner loans to meet the costs of repair in the event of an accident or mishap.

For consumers who are looking to support themselves financially without cutting back on insurance protection, taking out some form of debt consolidation may allow them to spread repayments over time and ease the strain on household coffers. This type of loan may be of interest to those Britons who currently lack home cover. A recent study by the Fair Investment Company showed that as many as one third of consumers throughout the UK are without such a policy.

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