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Britain has officially entered recession for the first time since 1991 as the economy shrank by 1.5 per cent over the last three months.

The fall is the biggest quarter-on-quarter decline since 1980 and was worse than the 1.2 per cent predicted by economists.

The Office for National Statistics (ONS) said the economy contracted by 1.5 per cent in the fourth quarter, after shrinking by 0.6 per cent in the third quarter.

Recession is generally defined as two quarters of successive contractions in GDP, which means the UK has been in recession since July.

Overall, GDP rose by just 0.7 per cent in 2008, which was the weakest performance since 1992.

Economic indicators pointed toward a sharp contraction in GDP, with all sectors of industry reporting falls in production.

Industrial production fell by a massive 3.9 per cent over the quarter, while the dominant services sector fell by one per cent.

Unemployment has also risen to 1.92 million, while retail figures out later today are expected to show sales on the high street are depressed.

Howard Archer, economist for Global Insight, said: "The very sharp contraction in GDP in the fourth quarter of 2008, coupled with the extremely worrying outlook and ongoing serious financial sector problems, intensifies pressure on the Bank of England to take further measures to support the economy."

Analysts believe the economy will contract further in 2009, with predictions ranging between two and three per cent, in what could be the biggest decline since the Second World War.