UK economy continues to grow strongly
The UK economy grew by 0.8 per cent in the first three months of 2014, with output now on the verge of reaching levels last seen before the financial crisis began six years ago.
It was widely expected that output would rise by 0.9 per cent, but the Office for National Statistics (ONS) said growth had been held back by contractions in mining and other production activity.
But manufacturing grew by 1.3 per cent, its strongest quarter for nearly four years, bolstering the government’s hopes of re-balancing the recovery away from its reliance on consumer spending.
The overall size of the economy in the first quarter of 2014 was just 0.6 per cent below its peak in early 2008, meaning it looks likely to return to this level during the current quarter.
During the start of 2014, the construction sector is estimated to have grown by just 0.3 per cent, affected by storms and high rainfall in January and February. But the ONS said the weather was not judged to have had a significant impact on output over the period.
Mining and quarrying, along with electricity and gas production, and agriculture, shrank over the quarter, while the dominant services sector, representing more than three-quarters of output, grew by 0.9 per cent.
Manufacturing and construction are taking longer to return to health, and remain 7.7 per cent and 12.2 per cent below their pre-crisis peaks.
‘Broad-based recovery’
Chancellor George Osborne said: “The impact of the great recession is still being felt, but the foundations for a broad-based recovery are now in place.The biggest risk to economic security would be abandoning the plan that is laying those foundations.”
George Osborne talks to Economics Editor Faisal Islam
But shadow chancellor Ed Balls said: “Now that growth has finally returned, the question is whether ordinary working people will properly feel the benefit and we have a balanced recovery that’s built to last.
“David Cameron and George Osborne want to tell people the cost-of-living crisis is over, but millions of hardworking people are still feeling no recovery at all.”
The good news comes a year after fears that Britain was about to plunge into an unprecedented “triple-dip” recession amid dire warnings from the International Monetary Fund (IMF) about the impact of the coalition government’s austerity policies.
Instead, the UK has now recorded its fifth consecutive quarter of expansion, and the IMF now expects it to be the world’s fastest-growing major advanced economy in 2014, with output rising by 2.9 per cent.
The independent Office for Budget Responsibility predicts 2.7 per cent and the Bank of England 3.4 per cent.
Real pay rising
Mr Osborne has also been heartened by figures showing pay rises outstripping inflation for the first time since 2010.
Howard Archer, chief European and UK economist at IHS Global Insight, said: “The economy looks set to finally surpass in the second quarter its previous peak level which occurred in the first quarter of 2008.
“It’s been a long time coming but hopefully the economy can now sustain decent growth for an extended period.”