Ministers today admitted Britain is facing “very, very grave difficulties” after figures showed the economy did not grow at all in 2012.

Both George Osborne, the Chancellor, and Danny Alexander, the Chief Secretary to the Treasury, said they do not underestimate the scale of the challenge but insisted the Goverment is on a “path of repairing our public finances”.

Despite their optimism, City analysts warned that the economy is still “in crisis”, more than four years after the financial crash of autumn 2008.

Economists from the Royal Bank of Scotland said the last four years have produced the worst economic performance in a non post-war period since records started being collected in the 1830s.

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