Brighter growth figures fail to dispel fears of a double-dip recession in UK

Stronger than expected growth in Britain's manufacturing and service sectors helped push GDP growth up to 0.3 per cent for the last quarter of 2009, a slight improvement on the 0.1 per cent originally estimated by the Office for National Statistics.

But economists said it was "too soon to sound the economic all-clear" as they readied themselves for more grim news in the next quarter. Analysts warned that the impact of the VAT increase and the poor weather at the turn of the year could yet see the economic picture deteriorate, potentially plunging the UK back into a period of negative growth.

Howard Archer, chief UK and European economist at IHS Global Insight said stronger GDP growth at the end of 2009 gave the economy "a little firmer foundation for recovery". He added: "Nevertheless, it is far too soon to call the economic all-clear as serious economic and financial obstacles remain in the way of sustainable decent growth.

"Indeed, the significant weather-related hit to a still very fragile economy at the start of 2010 means that there is a very real danger that the economy could suffer renewed contraction in the first quarter."

Hetal Mehta, senior economic adviser to the Ernst & Young ITEM Club was also cautious: "

Concerns remain about the strength of the recovery. The severe weather and the reinstating of VAT to 17.5 per cent pose downside risks for quarter one, and a double-dip recession can't be ruled out."

The GDP figures officially put an end to 18 consecutive months of economic shrinkage in the UK economy, the longest period of uninterrupted downturn since quarterly records began in 1955.

The statistics also revealed the recession had been the deepest ever experienced in the UK, with the peak to trough slump revised to 6.2 per cent, greater than the 6 per cent fall of 30 years ago.

As the new figures were issued, speculation mounted that the brighter economic picture might tempt Gordon Brown to call an earlier than expected election.

That speculation was fuelled by a further narrowing of the Conservative lead in the latest polling figures, with an Ipsos Mori survey indicating Labour trailed the Tories by five points, standings that if replicated at an election would result in a hung parliament.

Rumours circulated Mr Brown was set to announce the date for the poll this weekend, a move that would overshadow David Cameron's speech to the Tory spring conference tomorrow.

Despite UK government attempts to dampen the speculation – "He doesn't have any audiences with the Queen planned for the weekend," said a spokesman for Mr Brown – the political significance of the upward revision was evident in the reaction.

Shadow chancellor George Osborne said: "This upward revision of last year's growth figures is welcome. It strengthens the Conservative argument that we now have to make a start on dealing with the debts that Gordon Brown has run up. That is how we will bring back confidence to the economy and deliver a proper, sustainable, job-creating recovery."

Chancellor Alistair Darling said the figures showed that the economy is recovering.

But he warned: "If you look at the other indicators, whether it's in Europe or America or even if you look at the Nationwide house price survey, you can see there's a lot of uncertainty."

He added Mr Osborne was "profoundly wrong" on the economy.