Double-dip concern as economy shrinks again

Britain's economy shrank more than expected at the end of last year, official figures revealed today.

They showed the economy contracted by 0.3 per cent in October to December, rather than 0.2 per cent.

Economists are divided over whether the gloomy news signals that Britain will plunge back into a double-dip recession.

The fall was blamed on the country’s powerhouse services sector declining slightly rather than being flat.

Household spending was also not as strong as previously thought, growing by 0.4 per cent rather than 0.5 per cent.

Millions of families are now spending less on food and non-alcoholic drinks, with a drop of 0.9 per cent in the final quarter of last year. People are now buying on average 11.8 per cent less food and non-alcoholic drinks than before the recession hit in 2008.

The fall in GDP in the final quarter of last year was largely driven by falling business investment. Economists stressed that there had been more positive news on the economy in the first few months of this year and many believe that the UK will not plunge back into recession.

But shadow chancellor Ed Balls seized on the latest figures to attack George Osborne’s spending cuts and tax strategy.

“It’s very worrying news that the economy shrank even more than we thought at the end of last year,” he said, adding: “These revised figures also show that since George Osborne’s spending review our economy has flat-lined and not grown at all.”

The Treasury declined to comment on the new figures. But Azad Zangana, a European economist at investment house Schroders, said: “The weakness highlighted, in combination with the poor production and retail sales data so far, make it more likely than not that the economy also contracted in the first three months of this year, which would put the UK in a technical recession.”