UPDATE 1-British economy heads towards "triple dip" recession

LONDON, Jan 25 (Reuters) - A slump in North Sea oil production, lower factory output and a hangover from the London Olympics caused Britain's economy to shrink more than expected in late 2012, pushing it perilously close to a "triple-dip" recession.

The Office for National Statistics said on Friday that Britain's gross domestic product fell 0.3 percent in the fourth quarter - a sharper fall than the 0.1 percent decline expected by analysts. GDP grew by 0.9 percent between July and September.

Sterling fell to a five-month low against the dollar and to its lowest against the euro in over a year after the data.

"This is a very disappointing outturn," said Philip Shaw, economist at Investec. "Markets realise that figures can be revised ... but clearly now the talk will focus on whether we are in a triple-dip recession."

Britain's economy is now 3.3 percent smaller than its peak in Q1 2008, having recovered only about half the output lost during the financial crisis - a worse performance than other major economies. The country slipped back into recession in the last three months of 2011, and only emerged from it in the third quarter of 2012, after a boost from the London Olympics.

The biggest driver for the fourth-quarter fall in GDP was a 10.2 percent drop in mining and quarrying output.