The economy unexpectedly shrank in the last three months of last year, prompting warnings of a grim 2011 as the government embarks on the deepest spending cuts in a generation.
The figures also complicate life for the Bank of England, which has come under fire for failing to keep a grip on inflation but which will be reluctant to raise interest rates when the economy is so weak.
Finance minister George Osborne said the shock 0.5 percent contraction would not derail his austerity plans, blaming the drop in output on the harshest December weather on record.
But even without the heavy snow, the economy would have struggled to register any growth, according to the Office for National Statistics.
Evidence the economy was in trouble even before the bulk of the budget austerity kicks in shocked financial markets, braced for growth of between 0.1 and 0.6 percent.
January's rise in value-added (sales) tax will only add to the economic headwinds, making a bounce back at the start of 2011 unlikely.
"This is a horrendous figure. An absolute disaster," said Daiwa economist Hetal Mehta.
Actually, several folks, myself included, predicted that this would happen. Austerity didn't work for Ireland, and it won't work for Britain. And surprise, Britain is now back in a recessionary contraction and will stay that way for the foreseeable future. You can't just lay off 2% of your country's entire work force and expect to do anything but spiral into a nightmare scenario.
But hey, Republicans want to do the same thing here.
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