Economists had expected a fall of 0.1%, with many pointing to an expected reversal of the “Olympics effect” that had helped the economy grow 0.9% in Q3.

The initial estimate from the Office for National Statistics, which added total 2012 growth was flat at 0%, confirms fears already raised by recent disappointing datapoints relating to the UK economy.

These included poor retail sales at the end of 2012 and a 0.3% slowdown in industrial production seen in November.

Worse-than-expected construction PMI data released earlier this month had also added to suspicions of a Q4 slowdown.

The ONS said falls in oil and gas extraction and factory output placed the greatest downwards pressure on the Q4 figures, pointing to problems with North Sea oil production.

Looking ahead

Early forecasts are more positive for Q1 2013, but a further contraction would see the UK slip into its third recession since the financial crisis.

The deteriorating figures, coupled with concerns over the safety of the UK’s AAA credit rating, have contributed to sterling falling to an 11-month low against the euro this week.

The pound has also struggled against the dollar since the start of the year, and fell further as the first estimate was published, down from $1.5810 to a five month low of $1.576.

Commenting ahead of the report, Capital Economics’ chief UK economist Vicky Redwood said the unwinding of the so-called Olympics effect – the boost to GDP provided by the London Olympic Games in Q3 2012 – would knock around 0.4 percentage points off the headline figure.