Government spending 'keeps Britain from recession'

Gross domestic product fell by 6.4% during the 18-month slump - worse than the 6.2% slide previously reported by the Office for National Statistics.

It was the biggest fall in output since records began in 1955 and reduced the size of the economy by £22 billion, costing hundreds of thousands of jobs.

The economy crawled out of recession at the end of last year with growth of 0.4% in the final quarter. The ONS today confirmed it grew by another 0.3% in the first three months of 2010.

The figures showed a 1.5% rise in Government spending added 0.4% to GDP growth - meaning without it Britain would still be in recession.

Experts said it underlined the risk Chancellor George Osborne is taking by slashing spending at a time when the recovery is fragile.

James Knightley of ING said: "With fiscal austerity being stepped up and consumer spending growth still falling there is significant reason for concern over the UK's growth prospects."

Growth is expected to be stronger in the second quarter - at around 0.5% or 0.6% - but could fall back in the second half of the year as tax hikes, spending cuts, and the crisis in the eurozone bite.

TUC general secretary Brendan Barber said: "The recession was even deeper than we thought and that leaves the recovery looking even more fragile. The deep, rapid spending cuts being forced through by the Government are the worst medicine possible for this sickly patient.

"An entirely avoidable double-dip now looks more likely. The price that we will have to pay in jobs and damage to our social structures makes that a very frightening prospect indeed."

Household spending fell 0.1% in the first quarter and exports fell 1.7% - a sign that demand both at home and abroad remains subdued.

Industrial production rose by 1%, with manufacturing up 1.4%, but construction fell 1.6%. In the powerhouse services sector, output increased 0.3% with business and finance up 1%.

The recovery in the housing market looks set to "tail off" in the second half of the year, mortgage lenders warned today.

The Council of Mortgage Lenders said 42,000 loans were advanced to people buying a house in May, up 2% on April but well below the recent high of 63,000 in December.