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The UK is officially in a  recession, figures have shown that the economy is at its worst since 1991. This is means that the there has been two consecutive quarters of falling economic growth

The economy shrank by 1.5 per cent in the fourth quarter of last year - worse than the declines seen in the recession of the early 1990s and the biggest fall in more than 28 years, according to the Office for National Statistics.

The ONS said the manufacturing industry saw output decrease by 4.6 per cent quarter-on-quarter in the last three months of last year. The services sector, which accounts for around 75 per cent of the economy, fell by one per cent - its worst performance since 1979.

Bank of England governor Mervyn King said the economy was expected to continue contracting into the first half of the year, with `further marked falls in output’

The Bank of England has aggressively cut interest rates to 1.5% - aimed at driving down the cost of lending and making it easier for consumers and businesses to access credit.

However, banks have been reluctant to lend sufficiently, despite a £37bn injection into major banks, and a scheme to offer insurance to banks against potential losses on risky loans.

A temporary cut in value added tax (VAT), from 17.5% to 15%, was an attempt to encourage consumers to spend and boost the retail sector and wider economy.

The unemployment rate was 6.1% for the three months to the end of November, compared with 5.2% in the same period of 2007.

It is the highest jobless rate since the three months to the end of April 1999.

December is the eleventh consecutive month that the claimant count has risen.

The number out of work is set to continue to rise as the seven weeks since the end of November have seen tens of thousands of jobs cut, including more than 27,000 jobs lost when Woolworths finally closed its doors.