Contracting economy means UK stands on brink of triple-dip recession

Recent cold weather increasing chances of two successive quarters of contraction (Getty Images)

Britain is on the brink of a triple-dip recession today after figures confirmed the economy contracted by 0.3 per cent at the end of 2012.

The Office for National Statistics (ONS) stuck by its previous estimate for the fourth quarter, although it now thinks the UK economy grew by 0.3 per cent across the whole of last year, rather than previous guidance of 0.2 per cent.

GDP figures for the current quarter are due to be released at the end of April, with the recent cold weather increasing the chances of two successive quarters of contraction, which would represent a return to recession.

The country's stagnant performance reflects a fall in industrial production of 2.1 per cent in the fourth quarter - including a 10.7 per cent slump in mining and quarrying - and the biggest fall since the first quarter of 2009.

However, household spending in the fourth quarter increased by more than previously thought, up 0.4 per cent from an earlier 0.2 per cent reading. Total disposable incomes rose by 2.1 per cent during the year as a whole, but slipped back 0.1 per cent in the fourth quarter.

IHS Global Insight economist Howard Archer said: "It looks touch and go whether the economy can avoid further contraction in the first quarter of 2013, and hence a 'triple-dip' recession."

He said heavy snowfall, which has hit parts of the UK in recent days, increased the chances of another quarter of falling output.

Marginal growth of 0.3 per cent in 2012 compared with 1 per cent in 2011.

The figures also showed a household savings ratio of 7.1 per cent, the highest since 1997, as people choose to save rather than spend. This figure was boosted by a £20.1 billion increase in wages and salaries versus 2011.

The UK's current account deficit shrunk to £14 billion in the fourth quarter - worth 3.6 per cent of GDP - from an upwardly revised £15.1 billion in the third quarter. For the year as a whole the UK's current account deficit was £57.7 billion.

The trade deficit - the difference between the value of Britain's exports and imports - widened to £9.6 billion in the fourth quarter, up from £8.1 billion in the previous quarter.

Companies exported 1.6 per cent fewer goods in the fourth quarter, while services exports fell 1.8 per cent.

Dr Archer said: "This export performance is really disappointing, even allowing for the problems in the eurozone and generally muted global growth, and is a blow to hopes that the economy can rebalance."

The UK's persistent economic weakness has already led to the loss of its prized AAA rating.

PA