Britain's economy grew at its weakest rate in three years in the first quarter as the credit squeeze tightened its grip, data showed today.
The Office for National Statistics said the economy grew 0.4 per cent in the first three months of the year, down from 0.6 per cent in the previous quarter and as high as 0.9 per cent at the end of 2006.
The figures show Britain's economy is now growing below trend, potentially giving the Bank of England more leeway to cut interest rates.
However, Bank policymakers have indicated some slowing of the economy is necessary to curb inflationary pressures and the figures did little to alter expectations that further rate cuts would be gradual.
"These data are unlikely to have been a surprise to the Monetary Policy Committee, for whom a cooling in the economy to below potential is required to take some of the heat out of inflation," said Alan Clarke, a economist at BNP Paribas.
"Nonetheless, today's numbers could yet be revised lower and the coming quarters are likely to be even worse."
Britain is the first of the G7 group of industrial nations to report on its economic performance this year. The United States, teetering on recession, will report its Q1 GDP next Wednesday.
On an annual basis, growth eased to 2.5 per cent in the first quarter from 2.8 per cent in the final quarter of last year. This was slightly below the consensus forecast of 2.6 per cent.
Most economists are predicting an even sharper slowdown in the months ahead.