London: European Union President Herman Van Rompuy said Europe must do more to pull the euro area out of a recession and restore economic growth, as the UK economy shrank in the first quarter. A slump in construction pushed Britain into its first double-dip recession since the 1970s.

"We are undergoing a mild recession in the eurozone and the challenges for some countries are significant," he told reporters in the Bulgarian capital Sofia today. "Europe needs to do more to pursue its strategy to restore economic growth by tackling youth unemployment, investing in innovation, the green economy, and boosting the single market."

The UK's gross domestic product fell 0.2 per cent from the fourth quarter of 2011, when it declined 0.3 per cent, the Office for National Statistics said yesterday. The median of 40 estimates in a Bloomberg News survey was for an increase of 0.1 per cent. A technical recession is defined as two straight quarters of contraction.

He also said Bulgaria is on track to exit the excessive-deficit procedure. The Balkan nation cut its budget gap to 2.1 per cent of economic output in 2011 from 3.9 per cent in 2010.

The Bank of England is in the final month of its latest round of economic stimulus and the drop in output comes as prospects dim in the euro region, Britain's biggest export market. As an anti-austerity backlash gains ground in Europe, the report may add to criticism of Prime Minister David Cameron and Chancellor of the Exchequer George Osborne's budget cuts.

"This isn't supportive of the fiscal consolidation programme, so the government is likely to be concerned about that," said Philip Rush, an economist at Nomura International in London. "The data were bad, and that supports the view that the Bank of England will do a final £25 billion (Dh148.1 billion) of quantitative easing in May."

Gilts advance

UK ten-year gilts advanced immediately after the data were published before easing again. The yield was unchanged at 2.097 per cent as of 11.15am in London. The pound fell as much as 0.4 per cent against the dollar and traded at $1.6101.

From a year earlier, the economy was unchanged in the first quarter. The median estimate in a Bloomberg survey of 31 economists was for 0.3 per cent growth from a year earlier.

The quarterly drop in GDP was due to a three per cent slump in construction, the most since the first quarter of 2009, and a 0.4 decline in industrial production. Manufacturing contracted 0.1 per cent and services, the largest part of the economy, expanded by 0.1 per cent, boosted by transport, storage and communication.

The data contrasts with a report yesterday showing confidence among manufacturers rose to the highest level in two years this month. The Confederation of British Industry's quarterly gauge of factory optimism surged to 22 from minus 25 in January.

Separate surveys this month showed that growth in services, manufacturing and construction accelerated in March. The British Chambers of Commerce said the GDP data is likely to be revised higher by the statistics office.

Surveys "have shown a more positive picture, and we believe these give a more accurate indication of the underlying trends," chief economist David Kern said in a statement yesterday. "We think it is likely that the preliminary estimate will be revised upwards when more information is available."

Rising energy prices, government spending cuts and anaemic wage growth are squeezing consumers, creating a drag on the recovery. Pay growth slowed to 1.1 per cent in the three months through February, less than a third of the inflation rate. An extra public holiday in June to mark Queen Elizabeth's 60 years on the throne may also depress economic output in the second quarter.