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.