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The UK has seen deflation for the first time since the 1960s.

Figures from the Office for National Statistics show prices as measured by the retail prices index (RPI) dropped by 0.4 per cent in March, when compared to the same month in 2008.

The decrease follows the zero per cent change in February's monthly report.

According to the organisation, the largest downward pressure came from falls in the prices of housing, household services, transport, food and non-alcoholic beverages.

These factors are also the reasons for the fall in the government's preferred consumer prices index from 3.2 per cent in February to 2.9 per cent in March.

Commenting on the figures, David Kern, chief economist at the British Chambers of Commerce, points out that RPI fell by more than expected this month.

He adds: 'Deflationary pressures could make the recession worse in the short-term, despite quantitative easing and the huge budget deficit posing inflationary pressures over the medium term.'

Last month, More Than Business claimed that small companies are already experiencing reduced prices through deflation, suggesting that costs for their ventures fell by 2.9 per cent over the last quarter of 2008.