THE UK is officially in recession, figures confirmed today.

The economy contracted by 1.5 per cent in the final three months of 2008 - the worst performance in more than 28 years, according to the Office for National Statistics.

The plunge is worse than most economists were expecting.

The last time GDP suffered a bigger fall quarter-on-quarter was between April and June 1980, when the economy was in a deep downturn.

The ONS estimates also showed GDP growth for 2008 as a whole fell to 0.7 per cent, the poorest full-year output since 1992.

The UK recession has been seen as all but inevitable in recent months as the financial crisis escalated in the wake of the credit crunch.

A crippling lending drought has hit the housing and constructions markets hard, with all sectors across the economy now suffering.

The ONS said the manufacturing industry saw output decrease by 4.6 per cent quarter-on-quarter in the last three months of last year.

The powerhouse services sector, which accounts for around 75 per cent of the economy, fell by one per cent in its worst performance since the third quarter of 1979.

Total production, which includes manufacturing and accounts for 18 per cent of the economy, plunged by 3.9 per cent in the last three months of last year in the lowest reading since the second quarter of 1980.

There are fears that the recession will be deep and prolonged, with Bank of England governor Mervyn King warning earlier this week that the recession was tightening its grip.

He said the economy was expected to continue contracting into the first half of the year with further marked falls in output.

Experts fear that 2009 will be far worse than 2008, with predictions that the economy could shrink by two per cent or even three pre cent in what could be the biggest decline since the Second World War.