UK economic dip worse than first thought

Gross domestic product (GDP), a broad measure for the total economy, declined by 0.3%, the Office for National Statistics (ONS) says, downwardly revised from previous estimates of 0.2%.

The ONS says there had been a slight decline in the services sector, which had initially thought to have been flat, while household spending was also worse than previously thought.

Howard Archer, an economist at IHS Global Insight, says: "The sharper than previously reported drop in GDP in the fourth quarter of 2011 is obviously disappointing but it does not fundamentally change the story of an economy that saw fitful and muted overall growth in 2011, with a relapse in activity at the end of the year.

"Attention is now firmly focused on whether the economy has returned to growth in the first quarter and, if it has, can it build on this in still difficult conditions?"

The economy is still expected to remain sluggish and lacklustre for the first half of this year at least, as households continue to be squeezed by rising unemployment and as pay fails to keep pace with the rising cost of living.

The Government's independent watchdog, the Office for Budget Responsibility, estimates growth of just 0.8% for 2012.