This contraction was worse than economists’ original estimates of a 0.1% decline, raising fears over the economic recovery.

In the third quarter of 2012, many economists were encouraged by the growth of 0.9% caused by the ‘Olympic effect’, which sparked the more optimistic forecasts for the fourth quarter.

According to the Office for National Statistics (ONS), household spending increased by 0.4%, up from the original estimate of 0.2%.

Households’ saving ratio was estimated to be 7.1% in 2012, the highest since 1997, and real household disposable income increased by 2.1%, the highest growth since 2003.

However, these increases were offset by a 2.4% fall in production over the year, caused mainly by the 2.1% fall in Q4.

Output of the agriculture, forestry & fishing industries fell by 0.5% in quarter four, while mining and quarrying output decreased by 10.7%.

The ONS pointed to a decline in investments and the £6bn net trade deficit as the main contributors to the fall in GDP.