The UK economy shrank by 0.5% in the last three months of 2010, according to new figures from the Office of National Statistics (ONS).
The shock contraction has been attributed, in part, to the severe weather during the month of December.
However, the ONS said that growth would still have been ‘flattish’ after the impact of the snow and ice was removed, while some business leaders have warned that there are other underlying factors behind the fall.
Analysts had predicted growth of between 0.2% and 0.6% in last quarter of 2010.
Chancellor George Osborne said the figures were ‘disappointing’ but he insisted that changing the fiscal plan would ‘plunge Britain back into a financial crisis’.
Meanwhile, the Forum of Private Business (FPB) is arguing that the Government’s ‘slow movement’ on policies to improve access to finance is the ‘real reason’ behind the risk of a ‘double dip’ recession.
‘Following the mini economic revival we have experienced recently, these figures might be seen as surprising, but small businesses have warned for some time that we are far from being out of the woods,’ said the Forum’s Senior Policy Adviser, Alex Jackman.
‘Clearly, the harsh winter weather, costing the economy an estimated £230 million per day at its worst, has been one factor but still not enough has been done to remove the shackles created by tax, red tape and the continued lack of affordable funding preventing SMEs from growing, creating jobs lost in the public sector and driving real, sustained economic recovery.’
He added: ‘Unless that changes, and changes quickly, there remains a very real threat of a ‘double dip’ recession and that could spell disaster’.