The UK economy shrank by 0.5% in the last quarter:

http://www.guardian.co.uk/business/2011 ... e-per-cent

If the economy doesn't return to growth this quarter, I can imagine some very heated discussions in Westminster and the credibility of Cameron's government dropping significantly.

I would expect the economy to contract for this quarter due to vat increase and inflation on the way up.

Yes and by more than everyone expects. Remember VAT was well sign posted so many would have brought forward any major expenditure to avoid it. I certainly did. The ONS estimate that the weather cost 0.5% but much of that would have been recovered very quickly, as people restock cupboards or had to buy winter clothing, so could be a lot less than the 0.5% estimated.

So if the coalition are listening to what the Latvian prime minister says then expect a serious dip, as they cut even further.

Maybe. But all the people who were snowed in before Christmas may now go out and spend that money.

Yes but were people snowed in till the end of December? While some things may not be bought now ie Christmas trees many things will.

We've got nothing to bill for January, but that's not unusual.