GDP growth fell faster than predicted in fourth quarter

Britain’s economy begun the year even weaker than predicted, as GDP growth fell by 0.3 per cent in the final quarter of 2011.

The Office for National Statistics said it had downwardly revised GDP estimates from 0.2 per cent at the end of last year, largely driven by falling business investments.

The ONS said there were also surprises in services, household spending and manufacturing.

The services sector, which accounts for the bulk of the economy and includes consumer spending, had been expected to flatline in the fourth quarter of 2011, but actually fell by 0.1 per cent.

Household spending returned to growth at the end of the year, but was still one percentage point lower than the same quarter in 2010.

Manufacturing declined 1.3 per cent, although this was slightly better than initial predictions. The construction sector also contracted.

Despite GDP being seen as a partial indicator of a nation’s economic health, most economists think industry data from 2012 suggests the UK will avoid another recession – defined as two successive quarters of contraction.

The UK's overall growth in 2011 was revised down to 0.7 per cent, having previously been predicted to hit 0.8 per cent. The Office for Budget Responsibility estimated just 0.8 per cent growth in 2012.

Vicky Redwood, chief economist at Capital Economics, said: "It looks as though the economy has managed to expand in the first quarter of 2012.

"Nonetheless, we still think that there are a number of reasons to doubt that the recovery can maintain the recent acceleration."

Shadow chancellor Ed Balls said: "It's very worrying news that the economy shrank even more than we thought at the end of last year. And these revised figures also show that since George Osborne's spending review our economy has flatlined and not grown at all.

Ball added: "This slow growth and rising unemployment means the Government is set to borrow an extra £150 billion to pay for the cost of economic failure.”