Warning over economic recovery as new GDP figures show decline

Scottish charities, trade unions and industry leaders have today warned of the dangers of cuts in public spending in light of today's figures showing the UK's gross domestic product (GDP) has declined.

GDP fell 0.5 per cent in the fourth quarter, raising fears of a double-dip recession.

The unexpected plunge between October and December ended what had been for the most part a year of economic growth in the UK.

The cold weather has been partially blamed for the results, with the Office for National Statistics saying that, had the weather impact been discounted, the results would have been "flattish".

Scottish Finance Secretary John Swinney said the figures "entirely vindicate" a decision by the Scottish government to defer cuts.

He added: "The UK's GDP decline underlines the fragility of that recovery, and the damage done by Westminster's cuts, including a massive cut of over 35 per cent in Scotland's capital budget over the spending period, which is why we have brought forward a 2.5 billion Non-Profit Distributing infrastructure investment programme to mitigate the impact of the cuts.

Secretary of State for Scotland Michael Moore said: "The fact GDP shrank in the last quarter is an obvious cause for concern but it is clear that extraordinary circumstances played a key part.

"The cold weather has had a significant knock-on effect in our economy.

"The Government has put a fiscal plan in place to reduce the deficit.

"Today the IMF has again said the failure to implement credible fiscal consolidation plans is a risk to growth in advanced economies.

"That is why we must stay the course on the plan we set out in June, which is essential to bring stability back to our economy as we deal with the financial legacy we inherited."

Grahame Smith, STUC general secretary led the warnings today, calling on the Government to reconsider its strategy.

He said: "It is essential that the Government now prioritises jobs and growth and revisits its economic strategy in the budget.

"Proceeding with cuts at this time will increase unemployment and the deficit."

Last week, the ONS revealed that retail sales in the UK suffered the worst December on record as the high street battled with freezing temperatures and heavy snowfall.

The construction blip, which posted growth in the second and third quarters of 2010, ended in the fourth quarter with construction output plummeting 3.3 per cent. There was some reprieve for manufacturing as production output rose 0.9 per cent in the quarter.