THE Brexit squeeze is “beginning to bite,” the UK Government’s opponents have claimed, after figures showed the economy endured a worse-than-expected slowdown in the first three months of the year as the services sector slackened and inflation hit retailers.

The Office for National Statistics said gross domestic product grew by 0.3 per cent in its initial estimate for the first quarter of 2017, down from 0.7 per cent in the fourth quarter of last year.

Economists had been expecting GDP growth to slow as consumers tightened their belts in the face of rising inflation but they had pencilled in a higher growth figure of 0.4 per cent.

The ONS said: "There were falls in several important consumer-focused industries, such as retail sales and accommodation; this was due in part to prices increasing more than spending."

Britain's powerhouse services sector, which accounts for 78 per cent of the UK economy, put downward pressure on overall growth after expanding by 0.3 per cent between January and March this year, slowing from 0.8 per cent between October and December of 2016.

The main drag came from the hotels, restaurants and distributions sector, which fell by 0.5 per cent, as increasing prices from rising inflation applied the brakes to retail trade and accommodation services growth.

Output in the construction sector was also dragging on GDP after expanding by 0.2 per cent in the first three months of the year following 1.0 per cent growth in the fourth quarter of 2016.

Production expanded by 0.3 per cent over the period with manufacturing increasing by 0.5 per cent thanks to a jump in motor vehicle manufacturing while agriculture growth eased to 0.3 per cent in the first quarter from 1.0 per cent in the final quarter of 2016.

It means GDP grew at an annual rate of 2.1 per cent in the first quarter of 2017.

Consumers have been feeling the pinch since the beginning of 2017, with inflation sitting at its joint highest level for more than three years at 2.3 per cent in March.

The rise in everyday price tags has been largely driven by the Brexit-hit pound, which has pushed up import prices and costs for manufacturers.

Andrew Sentance, PwC's senior economic adviser, said the GDP estimate was driven by a slowdown in the domestic economy.

"The sectors which trade actively with the rest of the world - manufacturing and business and financial services - saw quite healthy growth in economic activity in the first quarter.

"But this was offset by a significant decline in output in retailing and other consumer-related services, alongside a small drop in the output of the transport and communications sector.

"This is consistent with the other evidence we have received over the past month: a decline in retail sales, sluggish employment growth and a squeeze on purchasing power from rising inflation."

Stewart Hosie, the SNP’s economy spokesman, said: ‘’Today’s figures bring the Chancellor down to earth with a bump. Just a few weeks ago in the Budget he was boasting about growth expectations.

''Today confirms what we have argued for some time; that as the threat of a hard Brexit crystalises, the economy is faltering and consumer confidence has slumped.

''This election is an opportunity for voters to stand up to the Tories hard Brexit plans and demand that they put the economy first, end austerity, stay in the single market and support increases in household living standards that will boost the economy.''

Baroness Kramer for the Liberal Democrats said the latest numbers suggested “the Brexit squeeze is beginning to bite as prices rise and consumer spending plummets”.

She said the falling pound, lower wages and higher prices showed how Theresa May's divisive hard Brexit was leaving people worse off.

"It's no surprise the Chancellor has chosen to hide away today instead of attempting to defend this government's reckless choice to leave the single market. If you want to change the direction of our country, keep Britain in the single market and prevent a disastrous hard Brexit, this is your chance."

John McDonnell, the Shadow Chancellor, said the GDP figures showed the true threat to living standards under the Tories.

“Growth for the first three months of 2017 was only half of what was expected. It comes on the back of new forecasts last week from leading independent forecasters showing growth and earnings expectations slashed and inflation revised up.

“There is no hiding from the truth,” declared Mr McDonnell, “the Tories’ economic plan has undermined the UK economy and is a threat to working people’s living standards.

“This General Election is a choice between a Labour Party who will stand up for the many and a Tory Party which only looks after the privileged few,” he added.