THE FTSE 100 Index closed lower yesterday after figures revealed the UK economy shrank in the fourth quarter and delivered a blow to recovery hopes.

The FTSE closed 26.1 points lower at 5917.7 after the Office for National Statistics said gross domestic product declined by 0.5 per cent between October and December.

While the drop was blamed on weather, economists said the report heightened fears over the ability of the UK to withstand austerity measures.

Consumer stocks were among those unnerved by the weaker growth prospects, as Next dropped 67p to 2075p, Marks & Spencer fell 8p to 361.4p and Tesco declined 6.5p to 399p.

In the banking sector, Lloyds Banking Group eased 1.9p to 63.2p, Royal Bank of Scotland dropped 0.8p to 43.3p and Barclays weakened 2.1p to 298.5p.

The market was also hampered by weaker commodity stocks as investors continued to worry about possible moves by China to curb soaring economic growth. Randgold Resources was among the fallers, dropping 180p to 4855p, while Kazakhmys fell 58p to 1500p.

Fashion house Burberry topped the risers’ board, after peer Luxottica, which manufactures sunglasses for luxury brands such as Armani, posted a bullish update. Burberry jumped more than three per cent, or 33p to 1063p.

Guinness and Smirnoff vodka maker Diageo saw shares climb 20p to 1241p after a report revealed the US spirits market had seen signs of recovery last year.

In the FTSE 250 Index, shares in Imperial Leather soap maker PZ Cussons fell seven per cent after it reported largely flat halfyear profits and said it was cautious about prospects for the full year.

The company, which fell 26.6p to 352.6p, is fighting soaring input costs such as palm oil, a key ingredient in many of its products.