The economy shrank for the first time in 16 years between July and September, confirming the UK is officially on the brink of recession.
Economic output fell by 0.5%, according to the Office for National Statistics.
The UK will be classed as being in recession if the economy slows in the fourth quarter as well.
Prime Minister Gordon Brown admitted for the first time this week that the UK was heading for a recession.
Brown said: "Having taken action on the banking system, we must now take action on the global financial recession, which is likley to cause recession in America, France, Italy, Germany, Japan and because no country can insulate itself from it, Britain too."
The fall is far greater than expected and increases expectations of further interest rate cuts from the current level of 4.5% to ignite growth.
The services sector - which represents three quarters of the UK economy - fell 0.4%, the biggest drop in 18 years.
Within the services sector, hotels and restaurants saw the biggest fall, down 1.7%, compared with an increase of 0.2% in the previous quarter.