As predicted by the National Institute of Economic and Social Research (NIESR) (see earlier story), Gross Domestic Product (GDP) declined by 1.5% in the last quarter of 2008 making two consecutive quarters of negative growth – the official definition of recession. NIESR maintains that the economy actually went into recession in the second quarer of 2008 when official figures registered zero growth.

The figures from the Office for National Statistics (ONS), showed that the weak pound has done little to help exporters and practically all sectors of the economy shrank between September and December 2008 with manufacturing contracting by 4.6%.

The depth of the fourth quarter fall has led to some commentators suggesting that it portends a longer and deeper recession than had been hoped and the Chancellor - Alistair Darling - said that the figures underlined the scale of the challenges the government faced, saying "It's going to be a difficult year for families in the UK. We need to go about the problem with a sense of purpose"

The average recession in the UK in the last 55 years has lasted for nine months but the past two have lasted for fifteen months and there are now fears that this one could stretch into 2010. At the end of 2008 the economy was 1.8% smaller than the year before and projections for 2009 now stand at a decline of a further 2.1%. Considerably more than the 1.5% being forecast only a few months ago.

To accompany the fall in GDP, unemployment is accelerating with just under two million people now out of work, the housing market remains severely depressed and national retail sales are weak and getting weaker when deep price discounting is taken out of the equation.