Official government figures finally show that the country is in its first recession since 1991.

Gross Domestic Product (GDP) fell by 1.5% in the final quarter of 2008 after a fall of 0.6% the previous quarter, meaning the official definition of recession has been met.

The figures show the biggest quarter-on-quarter decline since 1980, and a fall of 1.8% compared to figures a year ago.

The figures also sent the sterling to its lowest value in 24 years. Also, the FTSE 100 index fell almost 2% to below 4,000 points.

The figures were produced by the Office for National Statistics (ONS), and showed manufacturing to be contributing most to the economic downturn with a 4.6% contraction.

The only economic area that hasn’t shrunk is agriculture according to the figures by the ONS.

The fall in GDP is steeper than most analysts were expecting.

Alistair Darling said that the figures underlined how much of a challenge the government faced. He said: “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.”

He added that countries across the world also faced recession, and that other governments should act quickly to stimulate their economies.

George Osborne, Shadow Chancellor, said the government was failing to command confidence at home or abroad.

He said: “With unemployment rising faster than anywhere else, and businesses closing every day, these figures are deeply worrying.
“It is difficult to see how we’ll get that confidence with a Prime Minister who blames everyone else for the mess we’re in and refuses to acknowledge any mistakes.”

The crisis started in the financial sector, but quickly spread to the wider economy. Unemployment is one of the biggest casualties, with 1.92 million people currently unemployed. The housing market and retail are all also suffering badly.

Retail figures were however, better than expected in December, growing 1.6% but ONS believe this could mostly be to do with heavily discounted prices.

Chief Economist at ECU Group, Neil Mackinnon said the GDP figures were “grim” and underscored the depth of recession, adding that “there are no green shoots of recovery, no light at the end of the tunnel.”

On average, all recessions in the UK since 1955 have lasted three quarters. However, the past two recessions have lasted for five.

In fact, forecasters believe this recession could stretch to 2010, and may be as severe as the recession in 1991.

Graeme Leach, chief economist at the Institute of Directors said: “the debate on the length and depth of the recession is extremely complex and at this stage one cannot be dogmatic about the outcome.
“The last recession is beginning to look as if it will be more like the 1980s than the 1990s in terms of lost output. We are well into the financial crisis but the economic crisis is only just beginning.”