The UK economy is contracting at the fastest pace in 29 years, according to revised GDP figures out today.

Data from the Office for National Statistics (ONS) show in the final three months of 2008 the economy contracted by 1.6 per cent – compared to the 1.5 per cent previous estimate.

This is the worst contraction since June 1980.

Gross domestic product (GDP) – the measure of an economy’s output – was two per cent lower in the fourth quarter than in the final quarter of 2007.

Over 2008 as a whole GDP rose 0.7 per cent, compared to a three per cent rise in 2007.

The biggest downward pressure on the economy came from the slump in the construction industry.

Jonathan Loynes, chief European economist at Capital Economics, described the data released today, including the balance of payments, as giving “a pretty gloomy picture of the state of the UK economy at the end of last year”.

“Not only was GDP growth revised down a touch to -1.6 per cent, but household spending fell by one per cent quarter on quarter rather than the 0.7 per cent previously estimated.”

He forecast the situation of the UK economy in the first quarter of this year is set to be just as bad.

“The early signals point to a fall in GDP of a similar magnitude in the first quarter, putting the economy on track to contract by as much as four per cent this year,” Mr Loynes said.

ONS data did today show Brits are at least saving more. The savings ratio rose from 1.7 per cent to 4.8 per cent, despite falls to interest rates.