UK economy shrinks by 0.2%

BRITAIN’S economy shrank by more than expected at the end of last year, raising the prospect of a return to recession.

Figures released today showed a 0.2 per cent contraction between October and December, the Office for National Statistics (ONS) said.

Despite the threat of recession - defined by two quarters in a row of GDP declines - Chancellor George Osborne insisted he will stick by the austerity measures which have been blamed for choking UK growth.

He said: “Britain has substantial debts. If we don’t deal with those debts, our problems will be worse.”

Today’s fall - below City forecasts for a decline of 0.1 per cent - was driven by a 0.9 per cent contraction in manufacturing and a 4.1 per cent drop in electricity and gas production as the warm weather caused people to turn down heating.

A small impact is also likely from the public sector strikes on November 30, when nearly a million working days were lost.