LONDON BRIEFING:New data reveals the UK recession is worse than previously thought, but some still believe a recovery is under way

NOW WE KNOW why we all felt so miserable in April – it was the recession, not the rain.

The surprise revision of British output data announced yesterday revealed not only that the recession in the UK is more severe than had previously been feared, but also that it started even earlier.

A revision of first-quarter gross domestic product (GDP) data had been widely expected in the City, but the extent of the recalculation caught economists on the hop.

Having previously put the contraction at 1.9 per cent, the statisticians now say the British economy shrank by 2.4 per cent between January and March this year. This is biggest quarterly drop in more than half a century, while the year-on-year fall of 4.9 per cent is the largest since records began in 1948.

Britain also entered recession earlier than had previously been thought, in the second quarter of 2008 rather than the third, as the GDP number for the three months from April to June that year was revised down from 0 per cent to -0.1 per cent.

Revisions to the way construction output data is collected and calculated are partly behind the big swing in the figures, but there was also a sizeable downward shift in the performance of the dominant services sector.

Glass half-full economists, although surprised by the scale of the revisions, made a good show of shrugging off the data as of largely historic interest.

As we enter the third quarter today, they prefer to concentrate on the green shoots of recovery that have been sighted in recent weeks, including news yesterday of an upturn in consumer confidence and the latest Nationwide building society survey showing a near 1 per cent increase in house prices in June.

This is the second consecutive monthly increase and takes the annual rate of decline in British house prices out of double-digit territory, at 9.3 per cent. This is the smallest fall since last July and, according to Nationwide, house prices have risen in three of the past four months.

It is the business of building societies to be optimistic on house prices and the June upturn may say more about the imbalance between supply and demand in the moribund market.

However there was encouraging news in a separate survey yesterday from GfK/NOP, which put consumer confidence in the UK at a 14-month high.

The glass half-empty crew fretted about the GDP data, warning that British chancellor Alistair Darling’s optimistic target of a return to growth by the end of the year looks even more unattainable than it did when he first delivered it to a chorus of disbelieving jeers from opposition benches in his April budget.

There were other causes for concern in yesterday’s statistics – the household-saving ratio fell from 4 per cent to 3 per cent in the final quarter and business investment tumbled by 7.1 per cent, raising questions over whether employers will be in a position to take full advantage of the upturn when it does arrive.

On top of that, balance of payments data saw a current account deficit of £8.54 billion (€5.9 billion) recorded in the first quarter, significantly above most economists’ forecasts.

The previous quarter was also revised upwards, to £8.77 billion, more than £1 billion higher than earlier estimates.

Economists will continue to argue over whether the recovery is really under way and it will take several more quarters before anyone can be sure. Most of them agree, though, that the foundations of a return to growth are still frighteningly fragile.

JUST WHEN Royal Bank of Scotland (RBS) might have thought things couldn’t get any worse, another group of angry protesters have fixed the bank in their cross hairs. This time it’s the environmentalists, who want to force the state-owned lender to clean up its investment policy.

RBS has long been an active investor in the energy industry and has been targeted by green lobby groups for some time. Now they have lodged an action at the high court to force the treasury to ensure RBS invests only in sustainable and ethical projects.

The groups – Platform, the World Development Movement, and People Planet – say they are taking action because the treasury has failed to provide answers to their questions on the relationship between public money, climate change and the role of finance in fuelling the expansion of coal, oil and gas around the world.

They are not arguing against the bailout but say the acceptance of taxpayers’ funds brings with it extra responsibility on such issues. They even go so far as to suggest that RBS could transform its image by going green. It might help, but I suspect it will take a lot more than that to restore its tattered reputation.

Fiona Walsh writes for the Guardiannewspaper in London