Ananova: British Economy Shrinks Less Than Feared The British economy shrank by 0.7% in the second quarter - less than previously feared. Data from the Office for National Statistics gave rare cheer for the economy, which was previously shown to have suffered a 0.8% decline. Instead, revised figures show UK gross domestic product (GDP) contracted by 0.7% in the second three months of the year. A pick-up in manufacturing helped drive the change, but it was still the worst year-on-year GDP fall since records began in 1955. The figures were unveiled as analysts warned a quick recovery was unlikely because of Britain's underlying structural problems. Vicky Redwood from Capital Economics said: "With tax rises looming, the labour market weakening and credit conditions still, any recovery in private sector demand will be weak. "We continue to expect a pretty minimal rise in GDP next year." The data also underscore the fact that the country is lagging behind Japan, Germany and France, who lately announced GDP growth for the second quarter. French and German outputs grew by 0.3%, whereas Japan's economy expanded by 0.9%. Britain will probably not fare as well as those countries in the future due to its shrunken manufacturing sector, according to economist Seijiro Takeshita from Mizuho International. "The Japanese and Germans didn't go so far in dipping into the American type of government style which was one of the major growth factors of the past decade", he told Sky News Online. Government and household debt levels are significantly higher than in France and Germany and the larger British banking sector was more severely hit by the financial crisis. Hans Redeker from BNP Paribas in London thinks for a long-term recovery "the British economy has to reduce its household debt levels". He added: "It has to increase its savings and it has in the future to rely on exports."