Britain remained mired in recession between July and September, official figures confirmed, although the pace of contraction was slightly slower than originally expected.

The Office for National Statistics (ONS) said that GDP fell by 0.3 per cent in the third quarter, revising its earlier estimate of a 0.4 per cent decline and taking the annual contraction in the economy to 5.1 per cent, up from 5.2 per cent. But analysts said that the improvement was not enough to suggest that the UK was catching up with other leading industrialised economies, which have emerged from recession.

The eurozone, including France and Germany, and Japan and the United States all returned to growth in the third quarter, after the worst global economic downturn since the 1930s.

The initial GDP figures last month confounded economists’ expectations that the recession had ended, prompting some to question the accuracy of the figures. Economists at Goldman Sachs said that they were “entirely sceptical” about the data.

But the ONS defended the reliability of its statistics, highlighting how the average revision between an initial estimate and a final figure for GDP is about 0.05 per cent. It admitted that there were “challenges” in calculating figures for GDP during recessions.

While most City economists predicted that the economy would grow in the final three months of the year, they sounded warnings about the sustainability of any turnaround. Colin Ellis, European economist with Daiwa, said: “Today’s data are mildly encouraging, in that the fall in GDP is now thought to be a little smaller, but they still point to serious doubts about the strength and durability of any future recovery in the UK economy.”

Jonathan Loynes, chief European economist of Capital Economics, said: “The outlook for the UK economy remains weak . . . the recovery will be slow.”

The third quarter figure for GDP was revised up, thanks to a smaller than estimated contraction in output by the dominant services sector, which declined by 0.1 per cent, rather than by the 0.2 per cent suggested last month. But the fall in industrial output was revised down from 0.7 per cent to 0.8 per cent.

Net trade also acted as a drag on the economy as imports continued to rise more quickly than exports, signalling that the weak pound was still failing significantly to benefit the economy.

Consumer spending stabilised, remaining flat over the quarter, but economists said this was partly due to government intervention through its car scrappage scheme, which is to be withdrawn in the coming months.

“Consumption was unchanged ... despite a strong increase in car spending — implying that, without the car scrappage scheme, household spending would have fallen again in the third quarter,” Mr Ellis said.

The downbeat data will come as a blow to Alistair Darling, who was hoping for some positive economic news to include in his Pre-Budget Report next month.

Q&A

The ONS explains its GDP figures:

Why is each quarterly GDP figure published three times?

The UK produces an early estimate of GDP about 25 days after the quarter in question. This provides a “flash” estimate of the real growth in economic activity, but it is revised as more information is gathered. There are routinely two revisions at monthly intervals

How often is the preliminary estimated GDP figure revised?

The ONS incorporates, quickly and transparently, new information into the published estimates as it arrives. Revisions should not be considered as errors, but as part of the process by which economic statistics are produced

If it is revised often, why is the initial estimate published? Is it useful?

The process of updating estimates as more information becomes available and the consequent revision means that there is a necessary trade-off between the timeliness and reliability of the early estimates. The Bank of England’s Monetary Policy Committee would prefer early imperfect data to work with, rather than wait for perfect data

Is there a limit on the time period when you can go back and revise GDP figures?

No, there is no such thing as a final estimate of GDP

Why are GDP figures more difficult to calculate in recession?

A recession brings challenges to producing estimates of GDP. For example, in 2008 the Government’s intervention into the banking sector by taking large shares had direct consequences for their classification as private or public ownership and had an implication on public sector debt. Other difficulties include the behaviour of businesses — what they did in previous periods may not accurately reflect the current situation

Does this mean the recession may not have been as bad as we thought, or was it worse?

We think the published figures are a reliable guide

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