Economy in worst shape since 1980

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The Office for National Statistics said its second estimate of final-quarter GDP showed a contraction of 1.5 percent in the last three months of the year. The annual rate was revised down by 0.1 percentage points to a fall of 1.9 percent.

Analysts had expected a slight downward revision of the quarterly rate, but the ONS left this unchanged, but it did cut its estimate for third-quarter activity to a fall of 0.7 percent from a previously reported 0.6 percent drop.

The figures confirm Britain entered a steep recession at the end of last year and are unlikely to alter expectations that the Bank of England will take further steps to ease monetary conditions.

With interest rates nearing zero, the BoE is moving towards buying assets with newly-created money to try and boost demand.

"The economy remains in deep recession. In Q1 we expect a contraction of similar magnitude to that seen in Q4," said Adam Chester, an economist at HBOS. "Consumer and business surveys point to ongoing weakness to the end of 2009."

British households cut expenditure by 0.7 percent in the fourth quarter, the largest drop since the second quarter of 1991.

Manufacturing and production output figures were revised down sharply, to show the biggest falls for both since 1974, when the government imposed a three-day working week because of energy shortages.

However, output estimates for the more dominant services sector were revised up slightly.

The International Monetary Fund expects Britain to be the worst-performing big economy this year, as its economic decline gathers pace. The United States, Japan and Germany all suffered bigger falls in GDP at the end of last year.