Economy setback raises fears of double-dip recession

THE economic recovery in the UK suffered a shock blow today as figures revealed that gross domestic product (GDP) declined by 0.5 per cent in the fourth quarter, raising fears of a double-dip recession.

The severe weather last month was almost entirely to blame for the unexpected plunge between October and December, which ended a year of economic growth in the UK, the Office for National Statistics (ONS) said.

The decline in GDP - the first since the third quarter of 2009 - was driven by a 0.5 per cent drop in the key services sector, which makes up more than 75 per cent of the total economy. With this drop, total growth in 2010 stands at 1.4 per cent, far below analysts' forecasts.

The figure, which is a preliminary estimate and subject to revision, will raise serious concerns over the strength of the economy as it enters the age of austerity and its ability to withstand the coalition Government's deficit-busting austerity measures.