This has raised fears of a recession - and hopes of an interest rate cut by the Bank of England.

The economy was flat between the end of 1998 and April 1999, after growing by only 0.1% in the last quarter of 1998.

Service sector growth is slowing down

Compared to one year ago, Gross Domestic Product, the measure of all goods and services produced in the UK, was up only 0.6%.

The Office for National Statistics says it is the weakest figure for GDP since 1992, at the end of the last recession.

The figure is also substantially below the government's official estimate of growth of between 1.0% and 1.5% in 1999.

Service sector lower

The figure was unexpectedly revised downwards from an earlier estimate of 0.1% growth.

The statistics office said that the growth of the service sector was weaker than first thought, with the sector growing by only 0.2% in the first quarter - the weakest figure for seven years.

Financial and business services led the slowdown.

The manufacturing sector, which only makes up one-fifth of the economy, is still in recession, with a decline of 0.3% for the quarter and 1.2% for the year as a whole.

Recession fears

The whole economy could still escape a recession, which is defined as two successive quarters of negative growth.

Surveys of business and consumer confidence point to a revival in the second half of the year, as the Bank of England's interest rate cuts feed through to the economy and fears of a global financial meltdown recede.

"We expect investment to bounce back given the strength of the consumer, improved business optimism and lower borrowing costs since the autumn," said Marian Bell of the Royal Bank of Scotland.

But these weaker-than-expected figures will raise hopes that the Bank of England will lower interest rates one more time in order to boost growth.

"I would say it is slightly helpful to the case for another rate cut," said Jonathan Loynes at HSBC Markets.

Hopes of further rate cuts helped shares on the London Stock Market, where the FTSE 100 index of leading shares rose by more than 100 points in early trading.

But the pound sterling fell below $1.60, as lower interest rates would make the currency less attractive to hold.