UK economy shrank 0.2% revised data confirms

Activity in the key service sector was unchanged in the last three months of last year

A second official estimate of GDP has confirmed that the UK economy shrank by 0.2% in the last quarter of 2011.

The fall marked a sharp reversal in economic growth from the third quarter of 2011, when gross domestic product (GDP) expanded by 0.6%.

However, the estimate for GDP growth in 2011 as a whole was revised down from 0.9% to 0.8%, versus the previous year.

The second estimate from the officer (ONS) follows a "flash" estimate given in January.

The Bank of England's governor, Sir Mervyn King, has warned the economy is likely to "zig-zag" this year.

The fall in GDP was largely driven by the biggest drop in business investment for a year.

The production sector, which includes manufacturing, fell 1.4% compared with previous estimates of 1.2%.

The ONS also said that the number for the output of the service industries was unchanged, while output of the construction industry fell by 0.5%.

It said household final consumption expenditure increased by 0.5% in volume terms in the last quarter.

The ONS also said that, in current price terms, compensation of employees fell by 0.3% in the fourth quarter of 2011.

UK economist at RBS, Ross Walker, said the figure was disappointing but he expected a return to modest growth for the first quarter of this year.

"It's a pretty poor number," he said "The main positive is that improvements [in survey data] that look increasingly broad-based have not been captured, and we will get a bounce back in Q1 [the first three months of 2012].

"I don't think it will be a spectacular Q1 but I think we will squeeze some growth out of it."