Business investment falls sharply

By Sumeet Desai and Fiona Shaikh

LONDON (Reuters) - Business investment in Britain fell by a whopping 10.4 percent in the three months to June, its sharpest decline in 24 years and raising the risk that Q2 GDP figures could be revised down, official data showed on Thursday.

Compared with a year ago, investment fell 18.4 percent, the biggest drop since records began in 1967.

Analysts polled by Reuters last week had predicted no change to the preliminary estimate of GDP in the second quarter published last month showing a 0.8 percent decline when updated data come out at 9:30 a.m. on Friday.

But the business investment data, which on their own would reduce GDP by something like 1.1 percent, has got some of them thinking again.

"Unless there is an upward surprise elsewhere in the breakdown that offsets the diabolical business investment component, we could be looking at a downward revision to -1 percent or lower," said Alan Clarke, economist at BNP Paribas.

Such an outcome would contrast squarely with better than expected data out of countries like Germany and France which posted a surprise return to growth in the second quarter.

The 0.8 percent decline in UK GDP revealed last month was in itself a shock as many analysts and even policymakers had expected only a small fall in output after the 2.4 percent drop in the first quarter.

Colin Ellis, an economist at Daiwa, said a downward revision was "definitely possible" though his best guess would still be no change to the initial estimate because of a positive contribution from net trade and perhaps stocks.