UK heading back into recession - ITN

Britain is facing a return to recession after figures showed the economy shrank by more than expected at the end of last year.

The 0.2 per cent contraction between October and December, estimated by the Office for National Statistics, is likely to be followed by a further decline in the current quarter, economists warned.

Despite the threat of recession - defined by two quarters in a row of GDP declines - Chancellor George Osborne insisted he will stick by the austerity measures which have been blamed for choking UK growth.

He said: "Britain has substantial debts. If we don't deal with those debts, our problems will be worse."

The fall - below City forecasts for a decline of 0.1 per cent - was driven by a 0.9 per cent contraction in manufacturing and a 4.1 per cent drop in electricity and gas production as the warm weather caused people to turn down heating.

A small impact is also likely from the public sector strikes on November 30, when nearly a million working days were lost.