Britain in double-dip recession: the ONS rains on the UK's austerity parade It was the biggest quarterly fall in construction output since the first quarter of 2009, when things were so bad that the Bank of England took the unprecedented step of cutting interest rates to an all-time low of 0.5pc and introducing quantitative easing (QE). Back then, the Bank's Monetary Policy Committee saw it as emergency action, but fast-forward three years and rates are still at 0.5pc, while QE rumbles on. Construction is back in the doldrums, and the ONS said its figures showed that while some private sector projects were holding up, public sector infrastructure projects were waning, not surprising in light of the drastic public sector spending cuts under way. The sector has been among the hardest hit by the crisis, first by a collapsing housing market, and more recently by weak confidence and the Chancellor's unwavering austerity drive. Construction companies under Labour relied on public sector spending on new schools, hospitals and other infrastructure, but those opportunities are drying up, spelling further problems ahead for the sector. Begbies Traynor, a business restructuring specialist, said austerity drove a 104pc rise in the number of UK construction companies in financial distress in the first quarter compared with the fourth quarter, as more of the same is expected this quarter. But at least the ONS data were expected to show a weak construction sector. They were not expected to show that industrial production fell by as much as 0.4pc, or that the dominant services sector grew by a pitiful 0.1pc, held back by a fall in business services and finance. The fear is not just what the numbers show, but what impact they will have on confidence, and ultimately growth. Larger companies criticised for sitting on cash piles for fear of investing in such an uncertain environment will not be cheered by news that Britain is back in recession. They will feel their caution all the more justified by such gloomy news, a point made by Deloitte's chief economist, Ian Stewart. "The materialisation of a double-dip recession is likely to be seen as vindicating a cautious stance on the part of corporates," he said. Consumers, too, already dealing with a nasty combination of high unemployment, weak wage growth and high inflation, are unlikely to be encouraged to go out and spend. Detail of spending is not included in the first estimate of GDP, but will be published in a second estimate next month. Of course, as the Chancellor was keen to point out on Wednesday, Britain is not alone in this, with other European neighbours - including Italy, Ireland and Greece - already in recession, and the whole region expected to follow suit when a first estimate for the first quarter is published next month. France and Germany may be in a slightly less worse position that the UK, because, with smaller deficits, there is a lesser need for austerity. Nick Clegg on Wednesday urged business leaders to resist a "panicked reaction" to the negative numbers, telling delegates at the Institute of Directors' annual conference that the "basic building blocks" of recovery were in place. The question is whether austerity, rising inflation and diminishing confidence will knock those blocks down.