Revised figures show the economy shrank 0.2% in last quarter
The UK's economy contracted 0.2% in the final quarter of 2011, revised figures have confirmed, while growth for the year as a whole was lower than previously thought.
Final quarter gross domestic product (GDP) was left unchanged in the Office for National Statistics' second estimate, despite consumer spending returning to growth for the first time in a year-and-a-half as retailers slashed prices.
The fall in GDP was largely driven by the biggest drop in business investment for a year, while the production sector, which includes manufacturing, declined 1.4% compared with previous estimates of 1.2%. The construction sector contracted and the powerhouse services sector was flat.
But the UK's GDP growth for 2011 as a whole was revised down to 0.8% from 0.9% in its previous estimate after growth in the first and third quarters was weaker than previously thought. The figures will add to fears that the UK could head back into recession - defined as two successive quarters of GDP falls.
Economists are currently unsure about whether the UK's economy will continue to deteriorate in the first quarter of 2012, after encouraging industry surveys in recent months.
Chris Williamson, chief economist at Markit, said: "Unless the eurozone debt crisis escalates, the coming year is therefore likely to see modest growth. However, there will no doubt be high volatility in the GDP numbers due to factors such as the Olympics and additional bank holiday for the Queen's Jubilee."
The figures from the ONS showed that household consumption rose 0.5% despite pay continuing to fall by 0.3% when the effects of inflation are included. But despite the rise in the final quarter, consumer spending fell by 0.8% for 2011 as a whole.
The fall in industrial production was worse than previously thought, with electricity and gas supply falling by 5.1% as the mild autumn weather caused households to turn down their central heating. The manufacturing sector declined by 0.8% in the quarter, which was slightly better than previous estimates.
Shadow chancellor Ed Balls said: "Since George Osborne's spending review, the economy has grown by just 0.2% compared to the 3.0% the Government predicted. And far from the eurozone crisis being to blame, only rising exports kept us out of recession last year.
"For the sake of hard-pressed families, pensioners, young people and businesses, George Osborne needs to listen and use next month's Budget to change course. It's his last chance to make a difference to our economic prospects this year and next."