The longest period of uninterrupted economic growth in British history has ended, leaving the country on the brink of recession.

Almost two decades of increasing employment, disposable income and house prices ground to a halt in June, official figures showed yesterday.

After 16 years, or 63 consecutive quarters, of continuous growth it is likely that Britain is already in recession, City analysts say. Another downgrade in a month’s time could confirm that the economy has shrunk.

The latest data, from the Office for National Statistics, showed a slump in every part of the economy as the credit crunch and the rising cost of living took their toll.

The economic standstill in the second quarter of the year came after a revision of figures wiped out the meagre 0.2 per cent growth reported earlier. It is the lowest reading since 1992, when the country was in the throes of the last recession.

In a symptom of how people are struggling to make ends meet, it has emerged that Asda is now regularly seeing a sharp fall in sales in the third week of the month as people run out of cash before pay day. The supermarket said that it was offering its biggest price cuts to coincide with this time.

The danger of tougher times ahead was emphasised last night by Ben Bernanke, Chairman of the US Federal Reserve, America’s central bank, who said that the global economy was being shaken by a “gale force” storm. The world faced “one of the most challenging economic environments in memory”, he said.

The new figures showed that spending by consumers dropped in the second quarter by 0.1 per cent — the first fall for three years — as families struggled with relentless rises in food and fuel bills.

Alarm among businesses that deepening economic woes will undercut demand for their products and services also hit growth. Investment spending fell by 5.3 per cent as unsold goods piled up on companies’ shelves. The construction industries were hit too, as the housing slump led to an increase in abandoned homebuilding projects, and caused Britain’s building sector to shrink by 1.1 per cent.

There was no relief in manufacturing, which some experts had hoped might take up the slack from the weakness in the rest of the economy. Factory output tumbled by 0.8 per cent between April and June, despite the boost to exports from the sharp slide in the pound.

The vast services sector — spanning businesses from hotels and restaurants to accountants, lawyers and architects — did manage to eke out growth of 0.2 per cent but this was its weakest showing for more than 12 years. The frailty of services, the driving force for the economy, was widespread. Battered by the credit crunch, the City and financial industries were hit especially hard, shrinking by 2.8 per cent.

City economists said that but for overseas trade, which was boosted by a fall in foreign imports, the economy would have already been confirmed as in recession in the second quarter, with domestic demand falling over the first half of the year.

Ross Walker, of Royal Bank of Scotland, said: “There were no positives in these data – a collapse in investment, a contraction in household demand and a fall in exports.”

Jonathan Loynes, of Capital Economics consultants, said: “The UK looks almost certain to head into recession in the coming quarters. Things will be considerably worse in 2009.”

News that the economy is stagnating will increase the pressure on Gordon Brown. Last week Mervyn King, the Governor of the Bank of England, sounded a warning that Britain faced “a difficult and painful adjustment” throughout next year.

The Prime Minister and Alistair Darling, the Chancellor, are expected to go on the offensive next month and unveil measures aimed at easing the financial stress on families and businesses. However, with their scope to shore up the economy hemmed in by the dire state of government finances, Mr Brown and the Chancellor will be pinning their hopes on the chance of a cut in interest rates before the end of the year. Economists said yesterday that the chances of an eventual reduction in rates before Christmas had risen after yesterday’s bleak news.

Opposition parties seized on the standstill in the economy to taunt Mr Brown with charges of abject failure. George Osborne, the Shadow Chancellor, said: “For years Gordon Brown has boasted of consecutive quarters of economic growth. Now economic growth has ground to a halt and Brown’s bubble has burst.”

Vincent Cable, the Liberal Democrats’ Treasury spokesman, said: “We are now seeing the full extent of the self-delusion which led ministers to believe that everything was well with the British economy.”

The standstill now gripping Britain finally brings down the curtain on a record winning streak for the economy since 1992. It brings an end to the boom time that Mr Brown boasted was the country’s longest stretch of unchecked growth for two centuries. Over 16 years, Britons have seen their house prices almost treble, unemployment tumble to its lowest level in generations and living standards soar. Incomes have risen by more than a quarter, fuelling a high street boom in which consumer spending surged by an average of 3 per cent a year.

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