The royal recession: Queen hit by credit crunch

The Queen: Soaring bills raise royal family's yearly cost to £40m

The Queen has been hit by soaring prices as Britain stands on the brink of recession, new figures show today.

Official statistics showed the economy grew by only 0.3 in the first three months of the year. It was the slowest rate of expansion for three years and was met with shock in the City where experts said there was now a chance of an economic collapse.

Recession is defined as two successive quarters of financial decline - not seen in Britain since the early Nineties.

The figures were published as the Queen was revealed to have been hit by costs soaring by nearly twice the official rate of inflation and her budget being frozen. Accounts from Buckingham Palace show the bill for running the monarchy soared by 5.3 per cent to £40 million last year.

In a further blow, the oil price hit a new high as it soared past $142 a barrel, raising fears of even higher petrol prices.

The Land Registry reported that house prices are 1.8 per cent lower than a year ago. Experts expect prices to fall by as much as 25 per cent by the end of next year. The unexpected downgrade and grim forecasts from the City will send a shiver through Downing Street on Mr Brown's first anniversary in No 10.

Jonathan Loynes, chief European economist at Capital Economics, said the latest blizzard of economic news painted "a pretty worrying picture" for Britain. He said there was "a very real chance of a technical recession".

Inflation is also well above the three per cent target at 3.3 per cent - and likely to rise above four per cent this summer. Millions are already struggling to deal with the rising cost of mortgages, fuel and food.

Howard Archer, chief UK economist at Global Insight, said: "There is undeniably a very real, and growing danger that the economy could suffer a mild recession."

The usually upbeat Philip Shaw, of Investec Securities, said: "Today's figures open up the possibility that growth will continue to weaken from a lower base, and although we take the view that the economy will avoid recession, our confidence is ebbing."

The gross domestic product figures were revised downwards after a late flurry of weak data from the services sector, the driving force of the British economy. It includes financial services as well as hotels, restaurants and bars.

The slowdown is set to hit corporate profits and therefore tax returns, leaving the Government in the disastrous position of having to raise taxes or cut spending in the build-up to an election, likely in 2010.

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