By Jennifer Ryan Oct. 23 (Bloomberg) -- U.K. gross domestic product unexpectedly dropped in the third quarter as enduring slumps in services, manufacturing and construction kept the economy mired in its longest recession on record. Gross domestic product dropped 0.4 percent from the previous three months, the Office for National Statistics said today in London. Economists predicted a 0.2 percent increase, according to the median of 33 forecasts in a Bloomberg News survey. The economy has now contracted in six quarters, the most since records began in 1955. Chancellor of the Exchequer Alistair Darling said this week he will focus on spurring economic growth as he struggles to cement a recovery in time for a general election due by June. Today’s data may add to pressure on Bank of England officials to expand bond purchases at their Nov. 5 decision after completing a plan to buy 175 billion pounds ($291 billion) in assets. “The main picture for the government going into the general election isn’t particularly promising,” said David Tinsley, an economist at National Australia Bank in London who used to work at the central bank. “There hasn’t been a great deal of evidence on the recovery. It would seem a very inopportune moment to end quantitative easing.” The data, the first for the third quarter from a Group of Seven nation, suggests Britain may turn out to be the last of them to exit the recession sparked by the worst financial crisis since the Great Depression. Central banks in Canada and Italy both forecast slumps in their economies ended in the same period, and the U.S. probably also returned to growth then, according to the median forecast of economists in a Bloomberg News survey. France, Germany and Japan exited their recessions in the second quarter. Services Drop U.K. services industries, which account for 76 percent of the economy, shrank 0.2 percent on the quarter, the statistics office said. The drop was led by distribution, hotels and catering, followed by transport, storage and communication, and business services and finance. Industrial production shrank 0.7 percent as manufacturing contracted 0.2 percent, the statistics office said. Construction slumped 1.1 percent. The economy’s output is “well below” the levels of a year earlier and there should be no illusion of a “smooth and painless” return to sustainable growth, Bank of England Governor Mervyn King said this week. Officials said at the Oct. 8 meeting that there is still a danger of further losses. Credit losses and writedowns worldwide now total $1.6 trillion. Lloyds Banking Group Plc and the government are weeks away from an agreement on whether the lender can escape a program to insure up to 260 billion pounds of potentially toxic assets, a person familiar with the matter said yesterday. Setback for Brown Today’s report is a setback for Prime Minister Gordon Brown as his ruling Labour party struggles to erode the poll lead held by David Cameron’s Conservatives. The opposition party had a 17 percentage-point gap over Labour in an ICM Research poll for the Guardian newspaper published on Oct. 21. The economy will contract 4.4 percent this year and then expand 1.3 percent in 2010, according to forecasts released this week by the National Institute of Economic Research. Some companies are weathering the slump. British Sky Broadcasting Group Plc, the U.K.’s biggest pay-television provider, said today that first-quarter profit rose. “We have won more clients despite the tough economic environment and I’m confident that we will continue to grow,” Chief Financial Officer Andrew Griffith said in an interview on Bloomberg TV. Slump Damage Today’s data show the recession shrank the U.K. economy by 5.9 percent, compared with a total 6 percent slump in the recession that ended in 1981, the statistics office said. Unemployment may keep rising even after the end of the recession as a lagged effect of the slump. St. Ives Plc, the U.K. printer of the Economist and Vogue magazines, has shed about 12 percent of workforce, Finance Director Matt Armitage said on Oct. 19. Niesr says that the Bank of England should pause its bond purchase program at the Nov. 5 decision, when officials will have revised forecasts on the economy. The British Chambers of Commerce has called for a further expansion of the plan to reach 200 billion pounds to secure the recovery.

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