UK economy shrank by more than expected

Britain’s economy shrank by more than was previously estimated during the closing months of 2011 as household income came under further pressure, according to official data released today.

The UK’s gross domestic product (GDP) fell by 0.3 per cent between October and December, compared with analysts’ expectations for a revision to a 0.2 per cent fall.

The latest revision from the Office for National Statistics (ONS) meant that Britain’s economy grew by just 0.5 per cent in 2011, compared with City forecasts of 0.7 per cent.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “The sharper than previously reported drop in GDP in the fourth quarter of 2011 is obviously disappointing but it does not fundamentally change the story of an economy that saw fitful and muted overall growth in 2011, with a relapse in activity at the end of the year.

“And attention is now firmly focused on whether the economy has returned to growth in the first quarter; and, if it has, can it build on this in still difficult conditions?”

Archer added: “One new piece of information was that real household disposable income fell by 0.2 per cent quarter-on-quarter in the fourth quarter of 2011 and by 1.2 per cent over the year as a whole, thereby highlighting the pressure that consumer are under.”