UK economy
Britain's economy is back in recession with 2012 proving difficult for Chancellor George Osborne (Reuters)

Rainy weather across Britain has been a fitting real-life metaphor to mirror the torrential downpour of bad economic news hammering down on Chancellor George Osborne's well-coiffured head.

With the latest disappointing, or perhaps depressing, data from the Office for National Statistics (ONS) showing a collapse in construction sector output, the country's statisticians say they may now revise already miserable first quarter GDP estimates down to a worse contraction.

AKA, Britain is likely in a deeper recession than first thought.

The European Commission forecast for UK growth this year has been slashed to just 0.5 percent, with the independent Office for Budget Responsibility in the UK thinking the country's economy will grow a paltry 0.8 percent - and even that is criticised for being too optimistic.

In the final quarter of 2011 Britain's economic output contracted by -0.3 percent. Preliminary estimates from the ONS said that in the first quarter of 2012 it contracted by -0.2 percent, meaning the country is in a technical recession after two successive quarterly contractions.

Their original estimates cited a -3 percent drop in construction sector output demolishing any positive GDP numbers to put Britain into a double-dip recession.

Manufacturing and services sectors also suffering

Now the ONS is saying the first quarter saw construction output plunge by -4.8 percent, which would amount to a -0.3 percent GDP contraction in the first three months of 2012.

As well as the construction sector suffering, growth in the country's services sector - its biggest contributor to GDP at around 70 percent - was an anaemic 0.1 percent.

In Britain's services-led economy, this reflects a staggering lack of movement.

Osborne had praised manufacturing in his budget and David Cameron, the prime minister, chose a tractor factory in the heart of Essex to re-launch the coalition after a rocky period on Britain's political seas, with wave after wave of bad headlines in what became known as "omnishambles".

There was even a pledge in Osborne's budget to increase British exports to £1tn across the decade.

Slowing economic growth in the Asian powerhouse China, coupled with huge financial problems across Europe, Britain's biggest trading partner, threaten Osborne's ambitions of the UK manufacturing and exporting its way out of trouble.

This was crystallised by ONS manufacturing data that showed the sector dropped by -0.1 percent in the quarter, though this was a slower decline than the previous quarter's -0.7 percent contraction.

UK's 'positive' PMI data

When you look at other economic data, provided by Markit Economics, a private sector research company, you could be forgiven for taking a different, much rosier view of the British economy.

Markit's purchasing managers' index (PMI) surveys showed that in March the services, manufacturing, and construction sectors were all growing healthy.

Services sector output was shown to be growing at its fastest pace in two years, with a similar story for the other sectors.

It didn't take long however for purchasing managers to cast another grey cloud over Britain.

The PMI surveys hit a five-month low at the start of the second quarter, with growth slower in all sectors.

Some think that in light of contrasting official data, the PMI surveys have been discredited for being too optimistic.

An RBS research note described PMI data as a "woeful indicator of activity".

"Disappointingly, the lesson many commentators appear to have learned is that there must be something wrong with the official data if they don't align with the PMI despite the fact that objective analysis points unambiguously to the opposite conclusion," the RBS note said.

Households feel cost-of-living pinch

If you went into an average UK household you wouldn't find much room for optimism, either.

Sticky inflation and soaring energy costs have ensured that the cost of living is pushing families' finances to the brink.

March inflation came in at 3.5 percent, up on the previous month's figure and still painfully high in the face of stagnant wages that aren't rising at the same pace, meaning most people face a real-terms cut in their incomes.

Bank of England rate-setters were predicting a sharp fall in inflation across 2012, but this sudden rise has raised eyebrows and doubts over the forecasts.

Some Britons, once enjoying a safe and secure middle class lifestyle with a tidy income, have had to turn to foodbanks to feed themselves after losing jobs and property, not to mention living with the haunting spectre of debt.

"Within two weeks, I had gone from earning a decent wage, living in a nice flat in a good part of town, a social life and food on the table, to sleeping on a park bench and not eating for a week," Jagvinder, a Briton on the breadline, told International Business Times UK in a recent interview.

"I have worked my entire life and always lived comfortably through hard work, but now I find I can go hungry for a week at a time. Foodbanks are keeping me going."

Osborne's recent budget lifted the tax threshold for lower earners meaning they can take home more cash before they have to start paying tax on it.

However he has also changed the rules to benefits for low-earners, meaning couples must work for more hours in a week before they become entitled to claim certain welfare payments.

He and Cameron have pursued a strict austerity programme that has seen billions cut off of public spending, with welfare cuts at the very centre of their government's financial slicing and dicing.

Housing benefit, child benefit, education maintenance allowance - all targeted at lower-income families, all slashed, leaving people to feed from the welfare scraps that have been tossed to them by the political barons.

To cap it all off, the unemployment rate in Britain hit a 17-year high this year, putting job fears right to the front of the public's mind.

Some economists even think there could be three million people out-of-work in Britain in 2013.

All of these factors were reflected in Nationwide's Consumer Confidence Index for April, which plunged 9 points in April.

"It is not surprising that confidence remains fragile, with the economy shrinking over the past six months and labour market conditions still weak," Robert Gardner, Nationwide's chief economist, said.

How do you solve the UK's economic problems?

In the cold, empty shadow of government austerity many have seen the Bank of England as the only possible light to lead Britain back to economic growth through monetary stimulus - otherwise known as quantitative easing (QE).

Through its asset purchase facility, which finished in May after a two-and-a-half year lifespan, the Bank essentially printed £325bn to buy up high quality assets from financial institutions in order to improve market liquidity and in the hope that the cash freed up could be used to lend to businesses again, which would mean businesses spend more and the economy grows.

But hopes are hopes and reality is reality and you only have to look at the country's bleak GDP figures, or your own current account, to work out which won that battle.

A recent report by accountants Ernst & Young said that most of the stimulus from quantitative easing was being hoarded by big businesses.

"The economy is bleeding cash into company coffers at an alarming rate. This haemorrhage is sapping the strength of the economy, keeping it on the critical list," the report said.

"The corporate sector is accumulating cash at an astonishing and accelerating pace and acting as a major drag on the rest of the economy, keeping it close to stall speed.

"It is hard to see any strong revival in the economy until companies start to release this cash by spending more on acquisitions, investment or dividends."

So what can the Bank do? It has just finished this round of quantitative easing, but the nine members of its Monetary Policy Committee may feel that more stimulus is needed at a later date - despite inflationary fears - if the economy continues to drive further into the ground.

They may hold off until inflation falls further, but if and when they do re-start stimulus they may take a different approach, such as loaning money directly to small and medium-sized businesses.

Perhaps even, if they believe in the School of Mugabenomics, print money to pay off government debt directly and let it spend freely.

Another potential route to growth would be simply for the government to cool-off its austerity programme and spend more on infrastructure projects and expanding public services.

It would be an incredibly difficult move politically for the collation government because they are married to deficit reduction by austerity and have stubbornly stuck to this, their "Plan A", batting away calls for them to pick up some Keynes and spend their way out of recession.

To change direction would be to admit defeat in the eyes of their political opponents, the Labour Party, and hand opposition leader Ed Miliband and shadow chancellor Ed Balls a giant stick engraved with "I told you so" to hit them with.

The government also argues that steadfast commitment to austerity ensures that its borrowing costs are low and any wavering risks send them spiralling out of control, which will leave the country in an even worse position than it is at the moment.

Indeed gilt yields are 1.97 percent on 10-year debt, with investors eyeing the relative safety of the moated British Isles over the burning streets of eurozone countries.

Then there are those, usually libertarians, who say the government must slash taxes for both individuals and businesses, to put more money in everyone's hands so they can spend, spend, spend and lead us out of recession.

The trouble with this is two-fold.

Not only does, despite austerity, the government still have hundreds of billions of pounds in spending commitments which it can only really meet through taxation, but it faces serious public opposition in dropping taxes for the wealthiest in society.

Take Osborne's budgetary pledge to drop the 50p top tax rate for earners on over £150,000 a year, to 45p.

He was pilloried by the press for supposedly making his rich friends richer, while cutting services and benefits to make the poor poorer.

Then there's the option of raising taxes to fund government spending.

Again Osborne would face opposition, this time from powerful businesses and individuals, who would threaten to take their money elsewhere if there were plans for the government to take it from them.

A common theme in economists' forecasts, in future outlooks of companies' earnings reports, and research reports is uncertainty in the future.

With no prevailing and clear narrative from the government on just how the UK will crawl out of the current economic swamp; with ongoing crisis and recession across Europe; with slowing growth and demand from emerging economies; it looks like there's no end to Britain's financial troubles.