Britain was back in recession Wednesday after its economy shrank in the first quarter while Prime Minister David Cameron said the country was being buffetted by the European downturn.

Gross domestic product fell 0.2 percent between January and March, after a 0.3-percent drop in the fourth quarter of 2011, the Office for National Statistics (ONS) said in a statement.

That technically placed Britain in recession, which is defined as two successive quarters of contraction, amid a broader downturn that appears to be taking hold across Europe and notably in members of the eurozone.

"We are in a difficult economic situation in Britain," Cameron said in reaction to the data, adding that he stood by government spending cuts despite worries that they undermined growth.

"Just as you see now recessions in Denmark, in Holland, in Italy, in Spain, that is what is happening in the continent that we trade with. What is absolutely essential is we take every step we can to help our economy out of recession," Cameron told parliament.

Britain, which is not a member of the eurozone, clawed its way out of a record-length recession in the third quarter of 2009 caused by the global financial crisis.

"A second quarter of falling GDP combined with the likelihood of a weak current quarter means we are firmly in double-dip (recession) territory for the first time since the 1970s," said Deutsche Bank economist George Buckley.

"Fiscal austerity, private sector debt reduction, European sovereign uncertainty and sticky inflation all present challenges to the recovery," he warned.
The ONS said the economy had taken a fresh hit from weak construction and manufacturing output.

Britain's Conservative-Liberal Democrat coalition has implemented huge cuts to public spending and raised taxes in a bid to slash a record deficit inherited from the previous Labour government in 2010.

Labour leader Ed Miliband accused the coalition of implementing a "catastrophic economic policy," adding it was Cameron's "plan for austerity, his cutting too far and too fast, that has landed us back in recession."

However, Cameron insisted austerity was vital to keep state borrowing costs low, preserve Britain's top AAA credit rating and avoid the sovereign debt crisis that has crippled the eurozone.

"More borrowing, more spending more debt, that is what caused these problems. It cannot be the solution to these problems," the Conservative party leader said.
"We must not put at risk the low interest rates that are absolutely essential to our recovery ... These are difficult decisions to get on top of debt and public spending but they are the right decisions," Cameron added.

Highlighting the extent of Britain's own debt strains, official data on Tuesday showed public sector net debt as a percentage of GDP -- excluding the cost of bank bailouts -- hit a record high 66 percent in March.
Britain's total debt stands at ?£1.022 trillion (1.25 trillion euros, $1.65 trillion).

Wednesday's figures meanwhile confounded most analysts' expectations for growth of 0.1 percent in the first quarter after retail sales rebounded a strong 1.8 percent in March from February.

Separate recent data showed that the number of jobless Britons fell for the first time in almost a year.

To help Britain exit its last recession, the Bank of England slashed its main interest rate to the current record-low 0.5 percent in March 2009, when it also embarked upon Quantitative Easing.

Under QE, the central bank creates new cash that is used to purchase assets such as government and corporate bonds in the hope of boosting lending by retail banks and in turn growing the economy.

The Bank of England has pumped ?£325 billion into the economy since beginning the stimulus programme more than three years ago.