Britain's economy shrank more than expected at the end of 2012 with a slump in North Sea oil production, lower factory output and a hangover from the London Olympics pushing it perilously close to a "triple-dip" recession, Reuters reported.

Britain's gross domestic product fell 0.3 percent in the fourth quarter, the Office for National Statistics said on Friday, Jan 25, a sharper fall than the 0.1 percent decline seen by analysts.

Britain's economy is now 3.3 percent smaller than its peak in Q1 2008, having recovered only about half the output lost during the financial crisis -- a worse performance than most other major economies.

The country slipped back into recession in the last three months of 2011, and only emerged from it in the third quarter of 2012, after a boost from the London Olympics.

Finance minister George Osborne stuck fast to his austerity plan on Thursday, rejecting suggestions the International Monetary Fund's chief economist that he should consider slowing his deficit reduction plan.

Prime Minister David Cameron this week staked his political future on offering a referendum on Britain's place in the European Union. But it is Osborne's gamble that austerity will deliver strong growth before a 2015 election that will be crucial in determining his Conservative party's chance of winning.

After the figures were released, the Treasury conceded that Britain still faced a "very difficult economic situation". "While the economy is healing, it is still a difficult road," it said in a statement.