UK in shock 0.5 per cent output drop

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

The economy shrank by 0.5 per cent in the last quarter, the Office for National Statistics (ONS) said.

December's severe weather was expected to hit activity but economists had still forecast growth in the quarter of between 0.2 per cent to 0.6 per cent.

There was 0.7 per cent growth in the previous three months.

Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club said: "These figures are quite staggering and scarcely believable. No doubt this will mostly be attributed to the snow, and that undoubtedly would have had a significant effect.

"However, the ONS have also said that GDP would have been flat had we not had that disruption and quite simply that does not square with what any of the survey indicators are telling us."