UK industrial production fell sharply in January, the latest official figures show today, raising fears that the country will suffer its third recession in not much more than four years.
The Office for National Statistics said industrial production dropped a monthly rate of 1.2% from December, in contrast to expectations for a 0.2% rise.
Industrial output includes manufacturing, as well as sectors such as construction and oil and gas production. It accounts for around 20% of the British economy, which is Europe's third-largest.
Sterling fell sharply on the news as traders think it is more likely now that the Bank of England will back another monetary stimulus in the months ahead.
The industrial figures are the latest in a series of downbeat indicators suggesting that Britain's gross domestic product, or GDP, may shrink again in the first quarter of 2013. If it does so, the country would be in its third recession, defined as two consecutive quarters of economic contraction, since the end of 2008.
Today's figures are the gloomy backdrop to next week's annual budget statement from the government.
However, given the country's continuing high borrowing levels and the government's primary debt reduction policy stance, Chancellor George Osborne is thought to have little room to raise spending or cut taxes.
As a result, much of the burden to revive the ailing British economy has fallen on the Bank of England. In an effort to stimulate growth in the wake of the financial crisis, the central bank has kept its key interest rate at a record low 0.5% since March 2009 and pursued a monetary stimulus programme.
But so far, government cutbacks, financial troubles among key trading partners in Europe and difficulties in restructuring the banking industry have held Britain back.
Over the past few months, the Bank of England has held off from boosting its stimulus programme - under which it buys government bonds from banks to increase the amount of money flowing through the economy - in the hope the economy will recover on its own. Above-target inflation has also been a concern.