Data from the Office for National Statistics also showed that the economy contracted at a faster pace than previously thought in the final three months of 2011, by 0.4 percent.
The figures highlight the broad weakness in Britain's economy, which has struggled to recover from the 2007/08 financial crisis as government spending cuts bite and the debt turmoil in the euro zone crushes confidence.
The Office for National Statistics said the economy contracted for a second successive quarter between January and March, taking the annual rate of decline to 0.2 percent, a down ward revision. Economists had expected both rates to remain unrevised at -0.3 and -0.1 percent.
The data showed real household disposable income fell by 0.9 per cent and the household saving ratio fell to its lowest in a year at 6.4 percent.
Declines in construction and industrial output outweighed the biggest rise in government spending in almost 7 years.
Government spending rose by 1.9 per cent, construction, meanwhile, fell by 4.9 per cent - its steepest decline in 3 years, and industrial output fell by 0.5 percent. The services sector grew by 0.2 percent.
Britain's Conservative-led coalition government had been counting on a private-sector led recovery to drive growth while it presses ahead with austerity measures aimed at eliminating a budget deficit that is still around 8 per cent of GDP.
However, those hopes have been quashed by the worsening crisis in the euro zone - Britain's biggest trading partner - and signs of a slowdown in the United States and emerging economies.
Bank Governor Mervyn King said this week that Britain's economy risked falling into a downward spiral as businesses put off investment due to uncertainty over global prospects.
The Bank looks set to inject more stimulus into the economy as early as next week, with most economists expecting it to restart its quantitative easing gilt-buying programme with a cash boost of 50 billion pounds.
Separate data published showed Britain's current account deficit widened more than expected to £11.1bn from a shortfall of £7.2bn, equivalent to 2.9 per cent of GDP.