The British economy contracted by 0.3% in the final quarter of 2012, leading to fears that the economy could plunge into a triple dip recession, commented chartered accountant Harris & Co
The Office for National Statistics (ONS) said the fall was primarily down to a drop in mining and quarrying, following delays in maintenance at the UK"s largest North Sea oil field.
The economy actually grew by 0.9% in the previous quarter, boosted by the “feel good" factor of the London 2012 Olympic Games.
Growth over the entire year was flat, meaning the economy is still some 3.3% smaller than it was at its pre-crisis peak.
The biggest factor for the drop was mining and quarrying output falling by 10.2% - its most dramatic decline since records began 16 years ago - driven by disruption to North Sea oil and gas fields.
If oil and gas extraction are excluded from the GDP calculations, the economy would only have shrunk by 0.1% in the fourth quarter, the ONS said.
The ONS said it was a "bumpy" and “sluggish" economy.
Manufacturing fell by 1.5% in the fourth quarter, the services sector was flat, but construction output rose by 0.3%.
A Treasury spokesman said: 'It underlines what the Chancellor said at the Autumn Statement and the Governor of the Bank of England said this week: while the economy is healing, it is a difficult road.
'While today"s data confirms the scale of the challenge facing the British economy, this week has also seen the strongest yearly increase in jobs for over 20 years. A million new private sector jobs have been created and the deficit is down by a quarter.'
Chancellor George Osborne said the figures were "a reminder that last year was particularly difficult, that we face problems at home with the debts built up over many years, and problems abroad with the eurozone, where we export many of our products, deep in recession.'
'Now we can either run away from those problems or we can confront them. And I"m determined to confront them so we can go on creating jobs for the people of this country,' he added.
Shadow chancellor Ed Balls said: 'This government"s failing plan has now seen our economy stagnate for over two years and borrowing is now rising as a result.'