GDP figures: Economy shrank by 0.3% at the end of 2012, raising fears of a triple dip recession

Economy SHRANK by 0.3% at the end of 2012, raising fears of a triple-dip recessionOffice for National Statistics announces negative growth for final quarter of last yearResulsts mean there was no growth overall for the whole of 2012
Nick Clegg admits government was wrong to cut funding for big building projects, damaging jobs and growth
Boris Johnson says it is time to 'junk the rhetoric of austerity'IMF chief economist says the Chancellor should use the Budget in March to 'take stock' and change course

, raising fears of a triple-dip recession.

The figures are a devastating blow to David Cameron and George Osborne who were last night seen dining out in the Davos ski resort
hours after being told of the grim economic figures.

The contraction from October to December means that overall the economy did not grow at all in 2012.

The Office for National Statistics said the economy shrank by 0.3 per cent in the last three months of 2012, which meant there was no growth overall last year

The Office for National Statistics said the economy shrank by 0.3 per cent in the last three months of 2012, which meant there was no growth overall last year

Construction grew by 0.3 per cent, but not enough to make up for sharp drops in the last year

Construction grew by 0.3 per cent, but not enough to make up for sharp drops in the last year

Economists at Royal Bank of Scotland said the figures were the weakest four years of GDP performance outside post-war demobilisations since at least the 1830s.

The
Office for National Statistics published estimates showing gross
domestic product (GDP) shrank by 0.3 in the final quarter of 2012. Experts had
predicted a contraction of 0.1 per cent.

It marks a dramatic reversal of fortunes after the economy grew by 0.9 per cent from July to September, boosted by the Olympics.

Mr Osborne said he would not 'run away' from the problems the economy faced.

'We have a reminder today that Britain faces a very difficult economic situation, a reminder that last year was particularly difficult, that we face problems at home, with the debts built up over many years and problems abroad with the eurozone, where we export many of our products, deep in recession,' he said.

'Now, we can either run away from those problems or we can confront them and I’m determined to confront them so that we go on creating jobs for the people of this country.'

It
is feared the contraction at the end of 2012 could be followed by
another quarter of decline at the start of this year – plunging Britain
into a triple-dip recession. Britain’s prized AAA credit rating could
also be under threat.

The economy has been battered in 2013 by the severe snow storms which some claim has cost Britain more than 500million-a-day in lost output.

The technical definition of a recession is two consecutive quarters of the economy shrinking, so a triple dip will only be confirmed if there is also a contraction from January to March this year.

IMF chief economist Olivier Blanchard said the Budget in March would be a good time to slow the pace of austerity

Chancellor George Osborne has faced repeated warnings that his austerity programme has damaged growth

IMF chief economist Olivier Blanchard has warned that the British economy still looks bad and suggested Chancellor George Osborne use his Budget in March to slow the pace of cuts

The biggest drag on GDP came from the production and manufacturing sector, which saw output fall 1.8% quarter-on-quarter, according to the ONS.

Within this sector, mining and quarrying suffered the biggest drop in activity since official records began, down 10.2 per cent, due mainly to the shutdown of the Buzzard oil field in the North Sea amid extended maintenance work.

The powerhouse services sector, which accounts for 77 per cent of the economy, saw activity grind to a halt in the fourth quarter due to the absence of the Olympics boost in the previous three months.

The only bright spot was the construction sector, which delivered a 0.3 per cent rise in output.

London Mayor Boris Johnson will today warn Mr Osborne that dire warnings of the need for cuts is damaging Britain's prospects.

'We need to junk the rhetoric of austerity and be confident,' Mr Johnson will say in a speech at World Economic Forum in Davos.

London Mayor Boris Johnson says it is time to 'junk the rhetoric of austerity'

London Mayor Boris Johnson says it is time to 'junk the rhetoric of austerity'

The
International Monetary Fund, which believes the UK contracted by 0.2
per cent overall in 2012 and expects expansion of just 1 per cent during
this year, has urged Mr Osborne to change course.

Chief economist Olivier Blanchard said
the economy still ‘looks bad’ and the Budget in March would be a ‘good
time’ for the Chancellor to reconsider his Plan A programme of cuts.

‘We
said that if things look bad at the beginning of 2013 – which they do –
then there should be a reassessment of fiscal policy. We still believe
that,’ Mr Blanchard said.

In
another dramatic development, Nick Clegg yesterday admitted the
Government helped drive the economy into the doldrums yesterday by
failing to invest enough in building projects.

The admission is likely to fuel criticism from the opposition that the Government has not done enough to kickstart growth.

‘If I’m going to be sort of self-critical, there was this reduction in capital spending when we came into the Coalition Government,’ he told House magazine.

‘I think we comforted ourselves at the time that it was actually no more than what (former Chancellor) Alistair Darling spelt out.

‘But I think we’ve all realised that you actually need, in order to foster a recovery, to try and mobilise as much public and private capital into infrastructure as possible.’

The sharp drop in output was caused mostly by contraction in production, wiping out a small rise in construction

The sharp drop in output was caused mostly by contraction in production, wiping out a small rise in construction

The run of gloomy economic indicators increases the threat to the UK's prized AAA rating, with all three major ratings agencies placing the country on negative outlook.

Chris Williamson, chief economist at Markit, said the AAA threat will ‘intensify significantly’ if figures confirm a contraction at the end of last year.

The jobs market continues to defy the grim economic news, with more people now in work – 29.7million – than since records began in 1971.

At the same time, unemployment dropped by 185,000, the biggest annual fall for more than a decade, to 2.49million.