The Office for National Statistics said gross domestic product rose by 0.7 per cent year on year, exactly in line with expectations but down from the 1.1 per cent rise in the fourth quarter of 1998 and the weakest performance for seven years.

Analysts said growth would be sluggish for some time yet, but the danger point for the UK economy had likely passed and the slowdown now had all the hallmarks of the "soft landing" hoped for by Chancellor of the Exchequer Gordon Brown.

"The numbers are telling us that we are hanging on," said James Shugg at Westpac. "I suspect going forward the numbers are going to creep up a little bit...but it's still going to be a long period of fairly sluggish growth."

The pound fell slightly against the dollar after the data but the FTSE 100 share index shrugged off the news to stay higheron the day.

The figures showed growth in the service sector, the driving force in the economy recently, had slowed to 2.3 per cent year-on-year, its lowest rate since the end of 1992.

There was tentative good news for Britain's manufacturers. Although output was estimated to have declined further in the first quarter, the rate of contraction has slowed.

British industry has borne the brunt of the economic slowdown, hit by the double whammy of a strong pound and weak export markets.

That, and the risk of weakness spreading to domestic markets, made for some gloomy forecasts for British economic growth this year -- many of which are now being revised up.

Economists at Salomon Smith Barney said on Friday they had doubled their 1999 GDP growth forecast to 0.8 per cent.

"Furthermore, the perceived risk of an outright recession -- estimated at up to 40 percent at the start of the year -- has now fallen to just 10 per cent," they said.

The latest data make finance minister Brown's prediction of 1.0 to1.5 per cent growth for this year look somewhat less fanciful than in late 1998.Part of the thanks for that can go to the Bank of England's Monetary Policy Committee, which has chopped 225 basis points off interest rates since last October, taking them to a 4-1/2 year low of 5.25 per cent.

Analysts said the data had few implications for rates, being overshadowed by the stronger-than-expected 4.6 per cent increase in earnings earlier in the week.

Adam Cole at HSBC Markets said there was still scope for one more cut in rates down to 5.0 per cent, but added that the earnings data meant that was more likely to come in June than in May.

Were it not for unusually warm weather in January and March, which curtailed energy output, the quarterly rate of economic growth would likely have accelerated, Cole said.

"The figures confirm Q4 was the trough of the current cycle and that things will get steadily better from here," he said.

The British economy has grown for 27 quarters in a row since its trough in themiddle of 1992 and is now 20 percent bigger than it was seven years ago.