Britain's recovery slammed into reverse at the end of last year after the economy contracted by a worse-than-expected 0.3%, official figures revealed today.
The fall in gross domestic product (GDP) between October and December compares with 0.9% growth in the third quarter and will raise fears that the UK is on course for an unprecedented triple-dip recession.
GDP - a broad measure for the total economy - would have to contract again this quarter for the UK to be back in recession, but hopes of a rebound are starting to fade after a snow-hit start to 2013.
The Office for National Statistics (ONS) said economic output as a whole remained flat in 2012. The fourth-quarter drop is worse than expected, with most economists forecasting a drop of 0.1%.
It deals a blow to recovery hopes after the UK bounced back from the longest double-dip recession since the 1950s in the third quarter.
But the rebound was largely driven by one-off factors, such as the Olympics, and as the economy clawed back activity lost during the Queen's Diamond Jubilee holiday, which has skewed quarter-on-quarter changes in activity, the ONS said.
George Osborne said he would not "run away" from the problems facing the UK economy: "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 because of the debts built up over many years and problems abroad with the eurozone, where we export most of our products, in recession.
"Now, we can either run away from those problems or we can confront them and I am determined to confront them so that we can go on creating jobs for the people of this country."
Ed Balls said the figures showed David Cameron and Osborne have "been asleep at the wheel" spending too much time "obsessing" about an EU referendum.
“Today is the moment when David Cameron and George Osborne’s complacency is completely exposed. These deeply disappointing figures expose just how dangerously complacent the Prime Minister was when he said last autumn that the ‘good news will keep coming’," he said.
“The longer David Cameron and George Osborne cling on to their failing plan the more long-term damage will be done. They must finally listen and act to kick-start this economy.”
Yesterday Nick Clegg admitted that the coalition cut capital spending too deeply when it took power.
Clegg said ministers now realised money for infrastructure was needed to foster recovery and the Government must do more to fuel capital investment if Britain does plunge into a triple dip recession.
In an interview with The House magazine, he said: "If I'm going to be sort of self-critical, there was this reduction in capital spending when we came into the Coalition Government.
Following the publication of the figures RBS said it was the the weakest four years of GDP performance outside post-war demobilisations since "at least the 1830s".
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