Latest figures suggest economy shrank in the fourth quarter

Industrial production grew by a slower-than-expected 0.3 per cent in November, despite a strong rebound in oil and gas extraction that was due to the completion of maintenance at Buzzard oil field, Britain’s largest North Sea field.

Manufacturing output also fell 0.3 per cent on the month – less than a 1.3 per cent fall seen in October, but also overturning forecasts for a monthly rise of 0.5 per cent.

“It’s a disappointing set of data. We had thought that we might see a bounce back in manufacturing output over the month, but what we saw instead was a further contraction,” said Philip Shaw, an economist with Investec.

“Most of the official data are suggesting weakness over the fourth quarter.”

That would be further bad news for a Government struggling to convince voters that it can get the economy back on to a growth track while cutting public spending to reduce the budget deficit.

Sterling fell to a nine-month low against the euro after the statistics were released.

Tom Vosa, economist at Yorkshire Bank, said that soft industrial production will leave the UK economy struggling to find growth at the start of 2013.

Still, there have been some more positive signs, particularly on lending and in recent reports suggesting that the eurozone’s woes are bottoming out.

Recent data from the Bank of England suggests that its Funding for Lending Scheme is beginning to have some effect. But credit for small businesses remains elusive.