The news of Britain's gross domestic product (GDP) output shrinking by 0.3% has taken the city by surprise, leading to suggestions that the UK's triple A rating could be at risk.
Azad Zangana, European economist at Schroders said the economy's contraction of -0.3% - the fourth quarterly contraction in the last five quarters – was worse than city consensus expectations of -0.1%.
The drop is partly being blamed on the 'Olympic hangover', with services and industrial sectors seeing output fall. The economy had grown by 0.9% in the previous quarter, boosted by the London 2012 Olympic Games.
"There is a significant risk that the UK economy suffers a triple-dip recession. Weak underlying economic activity coupled with the disruption of recent poor weather could cause GDP to fall in the first quarter of 2013," he added.
"The sovereign rating agencies are circling. Disappointing growth and recent poor public finance numbers suggest the UK will lose its AAA rating in the near future."
SEE ALSO: Triple Dip? Maybe - Triple crisis? DefinitelyADVERTISEMENT
Philip Shaw, and analyst at Investec, called the GDP fall "a very disappointing outturn". "Markets realise that figures can be revised, the construction figures look a little bit flaky, but clearly now the talk will focus on whether we are in a triple dip recession. Certainly the news is unwanted," he added.
The figures were also influenced by a decrease in mining and quarrying, after maintenance delays at the UK's largest North Sea oil field, according to the Office for National Statistics.
If oil and gas extraction were excluded from the overall gross domestic product (GDP) calculations, then the data would have shown that the economy shrank by only 0.1% in the fourth quarter, the ONS said.
The London Chamber of Commerce and Industry (LCCI) was similarly gloomy, saying its members have cited increasing price pressures across the board.
"That, in addition to their continued need to restore margins post-recession, will be enough to act as a drag on growth in the coming quarters," said Ian Mason, head of policy at the LCCI.
Despite this, businesses are apparently feeling optimistic that a gentle recovery will happen during 2013.
The government should nurture this optimism through a further programme of capital investment, help for exporters and better access to finance, particularly for small business, Mason suggested.
Lee Hopley, chief economist at manufacturers organisation EEF, said there were some factors which indicate that 2013 won't be as bad as 2012 - the big euro-exit risk has diminished, the employment picture is better than expected and manufacturers are continuing to look to new markets for growth.
"That said, government must hit the accelerator on getting capital projects moving and be clearer about its economic priorities to give businesses more confidence to invest for the future," he warned.
And it's not just the big firms feeling positive about growth - the Federation of Small Businesses surveyed its members and found small firms are slightly more confident going into 2013 than they were going into 2012.
"Growth has been forecast in the year, but still below long-term trends. What we need to see is the government continue with reforms to encourage investment in the economy and to ensure the UK has the flexibility required to take full advantage of the recovery when it comes," said John Walker, the FSB's national chairman.
Many business commentators also talked about the possibility of the Bank of England turning on the money taps again to stave off a triple dip recession.
Chancellor George Osborne shied away from talking about further quantitative easing, but said in a statement that the GDP decrease was symptomatic of Britain's "difficult economic situation".
"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," he said.
"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."