News that the economy contracted by 0.3% in the final quarter of last year has exacerbated what has already been a dire last week for the UK economy.
This has dashed hopes that Britain may have steered clear of a triple-dip recession, which is a very real threat should the economy contract in this quarter as well.
Should the economy shrink in this quarter, something that many economists have predicted, Britain will officially be back in recession.
Nida Ali, economic advisor to the Ernst & Young ITEM Club, said that the figures meant the UK could well be veering towards a triple-dip recession.
“Looking ahead, heavy snow at the end of January raises concerns about Q1 2013,” she said.
“But survey data has been relatively positive, and the fact that the disruption came early in the quarter means there is more scope to catch up this time around. We are still on course for a weak Q1, with the chances of a fall in GDP not much less than 50/50.”
The figures add fresh misery to what has been a dismal week for the UK economy. The UK has been stripped of its coveted AAA rating by Moody’s, and the pound plunged to its lowest level in nearly three years against the US dollar and hit a 16-month low against the euro, before recovering on Monday.
Chris Williamson, chief economist at Markit, said recent industry surveys suggested the economy would “narrowly” avoid a triple-dip recession with 0.2% growth in the first quarter.
He said: “However, none of the root causes of the weakness of the economy have yet been resolved, suggesting very modest growth at best can be expected over the course of 2013.”