THE UK is in the grip of the longest recession since records began, according to official figures published yesterday.

Hopes for an end to the recession were scuppered as the economy shrank by 0.4 per cent between July and last month – a record sixth quarter in a row of decline.

But business organisations in the North-East remained defiant, saying there were still reasons to be optimistic.

Output has slumped 5.9 per cent since the onset of recession – almost as bad as the six per cent slump seen in the early Eighties – the Office for National Statistics said.

The lingering decline comes despite interest rates at a record low of 0.5 per cent since March, additional Government spending and an unprecedented £175bn boost to the money supply through quantitative easing.

And it shows the UK lagging behind other major economies such as France and Germany, which both emerged from recession in the second quarter of the year.

Chancellor Alistair Darling said he was still confident of a return to growth “at the turn of the year”, but the Government’s stewardship of the economy came under fire from political opponents.

“This news has destroyed Labour’s claim that Britain was better placed than other countries to weather the storms,” Shadow Chancellor George Osborne said.

Experts had been ready to toast an end to the recession during the period, with forecasts of a modest 0.2 per cent advance ending five quarters of decline.

Sarah Green, regional director of the Confederation of British Industry (CBI) in the North-East, said the figures were “disappointing and concerning”.

She said: “Despite modest signs of improving confidence in the manufacturing and service sectors, there has been a further fall in output acRoss the economy.

“Looking forward, this reinforces the CBI’s view that recovery, when it comes, will be fragile and volatile.”

But a spokesman for the North-East Chamber of Commerce remained optimistic, saying the trend was “moving towards growth”, as opposed to the economy shrinking at a faster rate.

Ross Smith, head of policy at the organisation, said many businesses in the region were seeing a return to growth and, hopefully, that would be the case for the economy as a whole very soon.

He said: “Confidence is undoubtedly starting to return, but clearly difficult trading conditions will not go away in a hurry. Maintaining that confidence is vital.

“Government must not take improving conditions for granted and believe vital services for businesses can now be withdrawn, or taxation increased.

“North-East businesses are using all their efforts and ingenuity to deliver a recovery and must be helped, not hindered to do so.”

Nicki Clark, assistant chief executive of Business and Enterprise North-East, said: “The announcement that the UK economy is still in recession, based on an initial assessment of GDP, will not dampen the belief in the North-East that we are poised to emerge strongly from the current economic downturn.”