Official figures show that the British economy shrank unexpectedly in the third quarter of this year, dashing hopes that it had emerged from recession.
The Office for National Statistics said British gross domestic product fell by 0.4% between July and September. Analysts had expected a 0.2% rise. The third quarter drop means the UK economy has contracted for six successive quarters for the first time since records began in 1955.
The news sent sterling sharply lower, with the euro gaining sharply to trade at 92p this evening.
Year-on-year, output shrank by 5.2%, only marginally better than the record 5.5% annual fall registered in the second quarter.
Many of Britain's major trading partners are already out of recession. The British government has forecast that growth will resume by the end of the year and is counting on a stronger rebound in the coming years than most independent forecasters.
A surprise decline in the services sector was a key factor behind today's disappointing figures. The sector contracted by 0.2% over the quarter, with the distribution, hotels and catering sub-sector leading the decline with a 1% quarterly drop.
UK mortgage pick-up continues
Separate figures showed that the number of mortgages approved for house purchase in the UK has bounced back to levels last seen at the beginning of 2008.
A total of 42,088 loans were approved for people buying a home during the month, the highest level since January 2008 and 77% above the figure for September last year, according to the British Bankers' Association.
There has been a steady increase in the number of mortgages taken out by people buying a property during the past eight months as the housing market has stabilised.
