Economy contracts 0.3% in final quarter of 2012

By HOLLY WILLIAMS AND GARETH MACKIE
Published on 25/01/2013 09:52

Britain’s recovery slammed into reverse at the end of last year after the economy contracted by a worse-than-expected 0.3 per cent, official figures revealed today.

The fall in gross domestic product (GDP) between October and December compares with 0.9 per cent growth in the third quarter and will raise fears that the UK is on course for an unprecedented triple-dip recession.

GDP – a broad measure for the total economy – would have to contract again this quarter for the UK to be back in recession, but hopes of a rebound are starting to fade after a snow-hit start to 2013.

The Office for National Statistics (ONS) said economic output as a whole remained flat in 2012.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “The 0.3 per cent quarter-on-quarter drop in GDP in the fourth quarter of 2012 means that the economy is halfway to the unwelcome achievement of a triple dip recession.

“The drop was larger than the consensus forecast of a 0.1 per cent decline and slightly more than our expectation of a 0.2 per cent drop.”

Today’s figures deal a blow to recovery hopes after the UK bounced back from the longest double-dip recession since the 1950s in the third quarter.

But the rebound was largely driven by one-off factors, such as the Olympics, and as the economy clawed back activity lost during the Queen’s Diamond Jubilee holiday, which has skewed quarter-on-quarter changes in activity, the ONS said.

The fourth-quarter GDP figures are preliminary estimates and subject to revision.