Lib Dems have warned that Gordon Brown's "consumer boom with an industrial bust" is throwing the British economy off course and makes early euro entry essential.

The call came as official figures showed the UK economy was "a whisker away" from recession at the beginning of the year.

Economic growth remained at zero in the first quarter of 2002, the Office of National Statistics reported, the second stand still quarter in a row.

The ONS blames the poor performance, the worst since 1991, on a reduction in services output by a fifth of a per cent, the first such fall since 1992.

Output in the manufacturing and product industries also fell, by 1.5 per cent, while retail sales grew at the slowest rate for nearly two years.

Conversely, the economy experienced increases in household spending by 0.7 per cent.

"Essentially, the UK economy was a whisker away from recession at the turn of the year. But we remain confident that with manufacturing sentiment on the rise and household spending continuing to be strong the recovery will proceed fairly strongly," said Philip Shaw, Investec chief economist.

In the budget last month, the chancellor predicted this year's economic growth to stand between two and 2.5 per cent - a forecast that appears to be heading off the rails.

A spokesman at the Treasury claimed that the poor figures reflected the state of the world economy and the effect of the September 11 terrorist attacks.

The government was still expecting growth to continue slowly throughout the year, he said.

Lib Dems attacked government failure to tackle issues affecting investment and manufacturing as the reason for the poor results.

Treasury spokesman Matthew Taylor warned that looming recession gave added momentum to the case for an early referendum on the single currency.

"A consumer boom with an industrial bust always threatened to throw Labour's economic management off course, and now that is clear for all to see," he said.

"Gordon Brown has acted as if manufacturing didn't matter - he must realise he was wrong, and deal with the serious problem of the overvalued pound against the euro.

"Never has a timetable for euro entry been more clearly important."