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UK economy shrinks more than expected on fall in construction output - Britain's recession is deeper than previously thought after the Office for National Statistics unexpectedly revised down its growth estimate for the first quarter because of a weak construction sector.

By Angela Monaghan: The Office for National Statistics said the economy shrank by 0.3pc in the first quarter and not 0.2pc as it reported in April. Economists had expected the ONS to maintain its first estimate.

The downward revision meant the British economy was 0.1pc smaller than it was a year earlier. The ONS previously estimated gross domestic product was flat on an annual basis.

It was a blow for George Osborne, who has repeatedly defended his unwavering austerity drive despite its impact on growth.

A combination of austerity and the eurozone debt crisis are expected to weigh further on the British economy in the coming months.

Howard Archer, chief UK economist, described the data as "very disappointing".

"Hopes of modest sustainable recovery developing during the second half of the year could be scuppered by events in Greece," he added.

The first-quarter revision was driven by the construction sector, where output fell by an estimated 4.8pc in the first three months of the year, more sharply than the 3pc fall reported in April. It was the biggest fall in three years.

The first-quarter GDP fall followed a 0.3pc fall contraction in the fourth quarter of 2011, plunging Britain back into its first double-dip recession since 1975.

The ONS left unchanged its estimate for services output, which rose by 0.1pc in the first quarter, and industrial production, which fell by 0.4pc.

It published fresh detail on spending, reporting a 3.6pc rise in business investment between January and March, while consumer spending rose by 0.1pc.

"With so many factors holding back the recovery, we still expect the economy to contract by about 0.5pc this year as a whole," said Vicky Redwood, chief UK economist at Capital Economics.

The OECD has forecast 0.5pc UK growth in 2012, lower than the Office for Budget Responsibility's 0.8pc growth forecast.

The first-quarter downward revision from the ONS also raised the prospect of more stimulus from the Bank of England.

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