Economy shrank last year but not by as much as we thought

Britain's economy shrank by slightly less than was thought at the end of last year, new statistics revealed today.

Revised figures from the Office for National Statistics found that growth went down by 0.5 per cent rather than 0.6 per cent. Growth for 2010 remained unchanged at 1.5 per cent.

Scott Corfe, of the Centre for Economics and Business Research, highlighted data showing household incomes were squeezed by half a per cent. He said: "Ultimately, this implies a very weak outlook for the consumer this year."

The FTSE 100 dropped 1.47 points after the figures were released and as Treasury officials and Chancellor George Osborne were being questioned by MPs about last week's Budget forecasts. The Chancellor was also facing questions about whether he fought strongly enough to stop Britain being signed up to the European economic bailout scheme that could mean taxpayers being handed a £4billion bill if Portugal asks for help.