EAST Anglia’s business leaders have called on the Government to take urgent action after shock figures revealed the dire state of the UK economy.

UK recovery hopes were dealt a severe blow yesterday after gross domestic product (GDP) figures showed the economy shrank by 0.7% between April and June - the third quarter in a row.

East Anglia’s business leaders, who nevertheless remain relatively upbeat about the region’s economy, called for investment in infrastructure to address dire declines in construction and manufacturing output.

Paul Winter, chairman of the Suffolk branch of the Institute of Directors (IoD) admitted the drop in GDP was much bigger than expected.

“The fact that this could be the longest double dip recession since World War II hits home what a remarkable set of economic circumstances we are facing,” he said.

“When we put this news into the context of the wider global economy with Greece and Spain circling the drain, it is clear that even tougher times are ahead. The Bank of England may respond with a cut to the Bank of England Base Rate and further quantitative easing but I would question whether either of these measures will be able to get the country back on course to grow in 2013.”

However, he added that compared to the north-west, the East of england was “not suffering too badly”.

“So far, programmes to improve infrastructure have been moving at glacial speed but action now needs to be taken as a matter of urgency,” he said. “New infrastructure projects financed by our low interest rates, proper relaxation of planning and employment red tape, and action to lower energy costs for manufacturers would all show Britain means business.”

Suffolk Chamber chief executive John Dugmore said: “This is not the news businesses wanted to hear. While many firms in Suffolk are faring better than official statistics may suggest, it’s time for the Government to be bold and show leadership.” His members were working “harder than ever” but Government needed to create an enterprise-friendly environment, he said. “Deficit-reduction is vital, and businesses aren’t expecting handouts. But we need a government that will pull the levers only it can reach to help companies export, invest, create new jobs and grow. That means infrastructure investment, the creation of a state-backed business bank to lend to new and growing companies, and meaningful deregulation.”

David Burch, director of policy at Essex Chambers of Commerce, called for infrastructure investment and “meaningful deregulation”. “Many Essex Chamber members are showing guarded opitimism but it is up the Government to ensure that confidence in businesses and consumers alike is not damaged further,” he said. Chairman of New Anglia Local Enterprise Partnership (LEP) Andy Wood said the latest GDP figures were “very worrying indeed”.

“Across Suffolk and Norfolk I sense a more balanced picture when talking to businesses but at best that brings us back to only being flat,” he said.

“Demand is falling away and finance is still not getting through to small and medium sized businesses. The Coalition Government needs to redouble its efforts in both areas to get things moving”.

Richard Proctor, office managing partner at Grant Thornton East Anglia, said the news was “difficult to reconcile” with last week’s announcement of rising employment and its own survey with the Institute of Chartered Accountants for England and Wales (ICAEW) of the region’s businesses which showed that confidence has been building.

“The Government is working to support UK business at some level, such as the �1.5million Mary Portas scheme to inject �100,000 to revive high streets in 15 towns including Lowestoft,” he said.

“But much more needs to be done. There is unlikely to be a u-turn on policy but further quantitative easing and more investment in infrastructure would show greater commitment to growth.”

Peter Martin, FSB East Anglia Regional Treasurer said: “Whilst we are disappointed in the figures revealed today, we are not surprised because economic times are still tough for small businesses. The resilience of small businesses is evident despite the banks restrictions on lending, which has had a very significant effect on holding back economic recovery.

“Policies such as credit easing, quantitative easing, the national insurance contributions (NICs) holiday and youth contract have yet to have a real impact on the ability of small firms to take on staff and grow. The FSB wants to see bold action such as extending the NICs holiday to all small firms that want to take on staff and government to bring forward infrastructure projects due in 2014 to really give the economy a boost.”