Construction output tumbled 4.9pc over the quarter, revised down from a fall of 1.1pc. The ONS said this was due to survey data replacing a forecast.

The decline is the biggest quarterly fall in construction output since the fourth quarter on 1980.

Output of the production industries fell 4.5pc compared with a fall of 1.8pc in the previous quarter, driven by the marked decline in manufacturing output.

Separate figures showed Britain’s current account deficit narrowed to £7.641bn in the fourth quarter of 2008 from an upwardly revised deficit of £8.162bn in the third quarter.

Sterling fell against the euro on Friday as it continued to suffer the fallout from Thursday’s weak retail sales figures. High street sales plunged by 1.9pc during February, taking annual growth down to just 0.4 percent, its weakest since 1995

Following that theme, John Lewis – the department store group whose sales are often seen as a barometer of British retail spending – reported on Friday sales dropped by 12.6pc in the week to March 21.

Job centre queue

The Recruitment and Employment Confederation (REC) said there had been a continued weakness in the labour market in recent weeks, with job vacancies falling at record levels.

Increasing numbers of workers being made redundant was coinciding with fewer new job opportunities becoming available.

There were sharp increases in the number of people looking for permanent and temporary work, a study found.

The report also noted a shift in bargaining power towards employers, with average salaries for successful candidates placed in permanent jobs falling for a fourth successive month in January.

The rate of decline in pay was the fastest since data collection started in 1997, while hourly pay rates for temporary staff was also down sharply.

Kevin Green, chief executive of the REC, said: “These figures continue to cause real concern and confirm that the labour market is continuing to contract, although the decline in permanent placements is less marked than in the previous month.

“The Government needs to breathe life into the jobs market, for example by harnessing the contribution of temporary work as a valuable mechanism for keeping people in employment.

“This means extending the employer incentives announced at last month’s jobs summit to take on and train temporary staff. It is also important that any steps to boost the jobs market are not undermined by potentially damaging legislation. In particular, the Government’s plans to introduce a tax on some temporary work from April must be delayed if we are to avoid even more jobs being lost at this critical time.”

Mike Stevens, of KPMG, which helped with the research, added: “Yet another month of desperate news on the UK employment front although there is a perceptible slowing in the rate of decline in permanent placements.

“Most employers are now looking at ways to cut cost to mitigate falling sales revenues. High on the list of costs, for what has largely become a service economy, is wages.”

The number of tax advisers, commercial pilots and underwriters out of work and claiming benefits has also more than doubled in a year, according to the Office of National Statistics. Economists believe top earners who escaped the full brunt of previous recessions are among those hardest hit now.

“In the 1980s it was blue-collar unemployment; in the 1990s it was white collar unemployment,” said Graeme Leach, chief economist at the Institute of Directors. “In this recession we’re seeing something new: high-income unemployment.

“These are individuals with nice houses and two children in private schools who are suddenly seeing their standard of living plummet. This will be one of the hallmarks of this recession”.

More than 1.1m people were out of work and claiming benefits by the start of December – up from 787,000 a year earlier.

Middle-aged workers are among the biggest victims.  There has been a 30% rise in unemployment among the over-fifties in the last quarter of 2008, while joblessness between 25 to 49-year-olds rose by 5%.

Following is the full list of occupations affected by the recession

Consumers also felt the pain asa the number of bankruptcies last year soared to the highest level since records began nearly 50 years ago.

The total number of businesses going bust, which covers administrations and liquidations, rose by more than 50 per cent as increasing numbers of firms struggled to access finance or secure insurance. But experts warned that the figures were set to rise higher in the coming year.

Malcolm Shierson, Partner at Grant Thornton’s Recovery and Reorganisation practice,aid “These numbers are bad, but they are going to get progressively worse as business and consumer confidence continues to fall.”
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“Companies across all sectors will struggle when they need to refinance their debt as lenders rein back on corporate lending. On top of this, the arteries of business are being clogged up as credit insurers cut back on the provision of cover for suppliers and contractors.”

Some 2,018 businesses entered into administration — the insolvency scheme usually used by larger companies — between October and December last year, up from 575 in the final quarter of 2007, figures from the Insolvency Service show.

Tony McNulty, the employment minister, decided to speak out after Citigroup and Royal Bank of Scotland joined a string of financial firms making thousands of job cuts as the economic downturn takes its toll on the City.

Unemployment is expected to reach 2 Million by Christmas, and Mr McNulty explained that “We do need to make sure Jobcentre Plus is geared up for your £75,000 a year banker as well as other people and we do need that with fleetness of foot and flexibility.”

Unlike the previous recessions, such as the one in the 1980’s when manufacturing was the worst sector affected, this economic downturn is hitting financial workers hard.

Citigroup said it had already cut 12,900 jobs in the past year and had identified a further 9,100 to go in the coming months. RBS, which is in line for a £20 Billion bail-out from tax payers, is expected to offlay 3,000 jobs.

Vicky Redwood

Yesterday more than 5,000 job losses were announced as an economist warned that unemployment would hit record levels in the worst downturn for 25 years.

According to Vicky Redwood of Capital Economics, the number claiming unemployment benefit would jump by 40,000 when official figures were announced today, taking levels close to the million mark. She went on to say that it is merely the tip of the iceberg and that overall unemployment figures would reach 3.3 million by 2010, more than the previous high of 3.278 million recorded in 1984.

She also said that there is usually a lag of about six months before the labour market reacts to this kind of change in the economy: “We have not seen the full effect of the recent slowdown in the economy, let alone the full force of the recession.”

Andy Bond, CEO of ASDA, the UK’s second largest supermarket, said that the cut should go “some way” towards restoring consumer confidence in the run-up to Christmas. He said it was “essential” that banks and building societies do not keep the saving for themselves but pass it on to their customers.

Property companies also welcomed the move.

When the production line is restarted it will operate until December on a three-day week reminiscent of the factory stoppages in 1974.

About 800 employees work on these models in the UK’s biggest car-making site. Bosses have denied that there will be job losses and insisted that pay will not be cut. However, the reduced operations will result in a 10% cut in production, similar to that announced by Honda, which has reduced its production of the Civic model at its Swindon factory.

A fall in GDP for the second quarter running is becoming certain, he said at a Market News International Seminar in London, and the balance of risks is shifting towards severe recession by the end of the year.

Mr Sentance’s observation comes on the back of a report by the Centre for Economics and Business Research stating that the City would be set back 10 years with a net loss of 62,000 jobs taking employment back to the same level as 1998.

Other measures the Treasury will introduce are a guarantee for Britain’s £2,000bn of retail and corporate savings. Meanwhile banks are under continued pressure to raise further capital as the cash shortage bites.

Sandy Chen at Panmure Gordon warned: “Government bailouts will only prolong the process of structural readjustment, which includes further 20% falls in US and UK house prices”

The Government will take stakes in RBS, HBOS, Barclays, Lloyds TSB and HSBC. The size of the stakes will be determined by each of the banks capital strength. RBS are in line for the biggest injection as the weakest in the sector.