BBC News - UK economy suffers 0.5% contraction

The UK's economy suffered a shock contraction in the last three months of 2010, figures have shown.

The economy shrank by 0.5% in the October-to-December period, the Office for National Statistics (ONS) said.

The severe weather hit activity in the quarter, but the ONS said even if the weather impact had been excluded, activity would have been "flattish".

The contraction follows growth of 0.7% in the previous three months and 1.1% in the second quarter of 2010.

The figures are set to raise concerns over prospects for the economy, with large public spending cuts expected to come in this year.

But Chancellor George Osborne said the government would not change its austerity programme.

"These are obviously disappointing numbers, but the ONS has made it very clear that the fall in GDP was driven by the terrible weather in December," he said in a statement.

"There is no question of changing a fiscal plan that has established international credibility on the back of one very cold month. That would plunge Britain back into a financial crisis. We will not be blown off course by bad weather."

The release is a first estimate for the quarter from the ONS and is subject to revision. The statistics body will publish two further updates at monthly intervals.

via bbc.co.uk