LONDON, Jan 25: Britain’s economy shrank by more than expected in the fourth quarter, data showed on Wednesday, placing it dangerously close to recession as the eurozone debt crisis and austerity measures hit output.

Gross domestic product (GDP) dipped 0.2 per cent in the three months to December, the Office for National Statistics said in a statement.

The decline was driven by weakness in the production and construction sectors, and was worse than market expectations for a 0.1 per cent contraction.

Economists warn this is likely to be followed by a decline in the current first quarter of 2012, which would place Britain back in recession defined by two successive quarters of contraction. First quarter data is due in April.

British Prime Minister David Cameron said the latest data was disappointing but stressed that the Conservative-Liberal Democrat coalition government would stick to its harsh austerity programme.

“These are extremely difficult economic times. These are disappointing figures. They are not unexpected figures,” Cameron said in his weekly question-and-answer session with lawmakers.

“They reflect the overhang of the debt and the deficit that we had to deal with. They reflect the higher food and fuel prices that put a squeeze on household income towards the end of last year.

“And ... they also reflect the crisis in the eurozone that has frozen Europe’s economies.”

He added: “This is the year we have to take further action to get our economy moving but the most important thing is to have a credible plan to get on top of the deficit.”

The coalition has sought to slash public spending and raise taxes to correct a record deficit that it inherited from the previous Labour administration in 2010.—AFP