UK economy close to triple-dip recession after dismal end of 2012 figures

The UK economy suffered a more than expected shrinkage at the end of 2012 with a slump in North Sea oil production, lower factory output and a hangover from London's Olympics bringing it dangerously close to a "triple-dip" recession.

Gross domestic product was down 0.3 per cent in the fourth quarter, the Office for National Statistics said on today, a fall sharper than the 0.1 per cent decline forecast by analysts.

The news comes as a blow to the Conservative-led government, which had a day earlier, defended its austerity programme against criticism from the International Monetary Fund. According to analysts, the government needed solid growth to meet budget targets, keep a triple-A debt rating and bolster its chances of winning the 2015 election.

Sterling was down to its lowest in thirteen-and-half months against the euro and hit a five-month low against the dollar in response to the data.

The UK economy was now 3.3 per cent smaller than its peak in Q1 2008, with recoveries of only about half the output lost during the financial crisis - a worse performance than most other major economies.

The country slid back into recession in the last three months of 2011, emerging from it only in the third quarter of 2012, after a boost from the London Olympics.