The UK economy suffered a contraction of 0.5% in the fourth quarter of 2010, figures from the Office of National Statistics (ONS) have revealed.
This is compared with an increase of 0.7% in the previous quarter, and comes after four straight quarters of growth.

The GDP estimate was "significantly affected" by December's bad weather, said the ONS, although if there had been no disruption, economic activity would still have remained "flattish".

The services and construction industries were large contributors to the decline, with construction output decreasing by 3.3% in Q4, compared with a rise of 3.9% in the previous quarter.

Manufacturing fared better, showing 1.4% growth compared with an increase of 1.1% in Q3.

The Forum of Private Business has argued that slow movement on policies to improve business finance - namely addressing the lack of affordable lending from banks and tackling the £24bn in late payments owed to small firms - is the reason the economy maybe facing a 'double dip' recession.

FPB senior policy advisor Alex Jackman said: "Following the mini economic revival we have experienced recently, these figures might be seen as surprising but small businesses have warned for some time that we are far from being out of the woods.

"Clearly the harsh winter weather, costing the economy an estimated £230m per day at its worst, has been one factor, but still not enough has been done to remove the shackles created by tax, red tape and the continued lack of affordable funding preventing SMEs from growing, creating jobs lost in the public sector and driving real, sustained economic growth."

He warned: "Unless that changes, and changes quickly, there remains a very real threat of a 'double dip' recession and that could spell disaster."

However, CBI chief economic advisor Ian McCafferty commented: "It was always expected that underlying levels of activity would be sluggish though the winter and into the first half of 2011; export activity is starting to strengthen and business investment is picking up, but spending by both government and consumers is expected to weaken.

"On these data it is far too early to conclude that the UK economy faces a serious double dip, and it will be some months before the true picture of its underlying performance becomes clear."