The economy shrank at its worst rate in 30 years in the first quarter, contracting faster than predicted by Alistair Darling and casting doubt on forecasts the chancellor made in his Budget just three days ago.

The 1.9 per cent contraction in the first three months of the year is an embarrassment for Mr Darling, who expected the fall to be similar to the 1.6 per cent fall in output at the end of last year.