Britain is preparing for grim official figures showing the country was still mired in a double-dip recession during the second quarter, as the latest set of dire economic data shows the mortgage market drying up.

A further collapse in construction sector output, disruption from the Queen's Diamond Jubilee celebrations, and seriously dampened consumer demand will all likely help push UK GDP to another quarterly contraction.

"Overall it looks like it is going to be negative and even the bits that are growing not growing particularly strongly in the quarter," Ross Walker, RBS analyst, told IBTimes UK.

Consensus over the figure due to be published by the Office for National Statistics (ONS) is for a 0.2 percent contraction in the second quarter of the year - with a downside risk of being worse than expected.

This would be the third consecutive quarter of contraction for the UK economy. In the final quarter of 2011, Britain's GDP contracted by 0.4 percent, followed by a 0.3 percent drawback in the first three months of 2012.

A serious fall in output from the construction sector of 4.8 percent in the first quarter was largely to blame for pulling the country into its second recession in four years.

Mortgage data published by the British Bankers Association (BBA) reveals that home loan approvals plunged by 21 percent on the year in June, to 26,269.

UK economy sectors suffering

Recent private industry data reflected another significant slump in construction sector activity.

"It looks like we have got another sizeable fall in construction output," Walker said.

RBS research shows a possible 3.5 percent plunge in construction sector output.

"This is pretty hefty, following a large fall in Q1," Walker added.

Figures from the manufacturing sector showed continued output contraction in June.

Similar data for the service sector - the UK's largest, representing around three quarters of GDP - showed a slowdown in growth in June, falling to an eight month low.

Walker said RBS predicts just 0.3 percent growth in the service sector across the second quarter.

"The risks there are to the downside," he warned.

Queen's Diamond Jubilee significant drag on GDP

A significant weight on the UK economy in the second quarter will likely be the Queen's Diamond Jubilee.

Bank of England economists said it could have provided as much as a 0.5 percent drag on GDP, as Britons were given an extra day off for the celebrations.

"The biggest single factor by a country mile is the impact of the Jubilee celebrations," Richard Barwell, RBS UK economist, told IBTimes UK.

"Essentially we got an extra day of holiday - so the Jubilee looks like an economy-wide general strike - and output temporarily drops."

Barwell said forecasts of the effect the Jubilee had on the economy are strengthened by knowledge of the impact of past, similar events, such as Royal Wedding between Prince William and Kate Middleton, and the Golden Jubilee a decade ago.

"Our estimate is you should see a sharp drop in output, broadly based across the economy between May and June," Barwell said, agreeing with the Bank's prediction of a half point drag.

"That in itself is a pretty big deal."

Consumer-facing business boosted by Jubilee but hurt by bad weather

Walker said that many of the consumer-facing parts of the economy "seem to fare reasonably well in Q2 and in the run up to and around the Jubilee".

"The official retail sales numbers didn't see a huge boost in the month itself, but you'd had some reasonable outturns prior to that. The consumer side has probably done okay," he said.

Ahead of the Jubilee, May retail sales volumes in the UK shot up by 1.4 percent month-on-month, beating expectations as consumers enjoyed hot weather and prepared for the celebrations.

However bad weather rained on an already dampened economy and looks to have extinguished any lift to retailers from the Jubilee.

Record rainfall and cold temperatures in June created a difficult trading environment.

"The heavy rain through much of the second quarter of the year is likely to have severely impacted some sectors of the economy, such as retail and construction where weather is an important determinant of economic activity," Scott Corfe, economist at the Centre for Economics and Business Research, told IBTimes UK.

Second half improvement for UK economy

Looking past the second quarter, a sudden return to growth in Q3 is anticipated. Growth across the whole of 2012 is expected to be flat.

"We have slightly stronger household consumption growth. In part, this is arithmetic," Walker said.

"Inflation is falling more rapidly than expected, so if nominal spending growth was unchanged from Q2, but you've got less inflation, by definition you've got stronger volumes growth."

Walker predicts an Olympics related boost to consumption worth around 0.2 percentage points.

As consumption picks up and with "a bit of a bounce in investment expenditure, which is running off a low base", said Walker, RBS has pencilled in 0.6 percent GDP growth in Q3.

"There's an Olympics effect, there's a base effect, normalisation. Obviously we don't expect that pace of growth to be sustained, but from here it looks like the third quarter might superficially be a bit better," he said.

BoE and government policy push

Both the government and Bank of England have stepped up their attempts to tackle the waning British economy.

Bank of England policymakers have loosed monetary policy further with an extra £50bn of quantitative easing announced in July.

They also announced two credit easing schemes - Funding for Lending (FLS) and the Extended Collateral Term Repo - which sees banks offered cheap loans by the Bank of England in the hope that they free up affordable credit to the so-called "real economy" of consumers and businesses.

Government focus is on infrastructure, with a £9bn fiscal injection into improving the railways being announced, along with a scheme for taxpayers to underwrite major projects that are struggling to secure finance and start work.

"We don't expect a notable policy response from government if the data show a third consecutive quarter of economic contraction," Corfe said.

"A movement away from the current programme of fiscal consolidation is difficult at a time when financial markets are fixated on the issue of sovereign debt, so the government is unlikely to abandon its current deficit reduction targets.

"The onus thus remains with the Bank of England to support growth through loose monetary policy."

Barwell agrees that the Bank will play a key policy role.

"In terms of policy the answer is more QE and the new FLS," he said.

"Adjusting fiscal policy to boost demand doesn't make sense.

"Fiscal policy should be used to raise the trend growth rate of the economy and to achieve a more equitable split of the cake."