British economy grows 0.8% in first quarter - official

Thursday 22 May 2014 18.43
Official GDP figures underpin signs of a strong recovery
Official GDP figures underpin signs of a strong recovery

Britain's households spent more and companies increased investment at the fastest pace in a year.

This extended the country's strong economic growth into the first three months of 2014, official data has shown. 

The figures offer some signs that Britain's rapid growth is slowly getting on the more sustainable footing that the Bank of England wants to see before it raises interest rates, though consumer demand remains by far the largest driver of growth. 

As initially estimated last month, gross domestic product between January and March grew by 0.8% from the last three months of 2013, the Office for National Statistics said.

In year-on-year terms, growth was 3.1%, also unchanged from the ONS's preliminary estimate and the quickest pace since the fourth quarter of 2007. 

The UK business investment growth showed that companies were also confident about the recovery.

But the pound, which has strengthened on rising expectations of an early interest rate hike by the Bank of England, fell after other data showed a bigger-than-expected fiscal deficit.

Britain's economy remains 0.6% smaller than its peak in early 2008, but is likely to surpass that level in the current quarter and the BoE forecasts growth in 2014 will reach 3.4%, its fastest pace since 2007. 

However, the central bank wants to ensure growth is on a firmer footing before it raises interest rates from their record low of 0.5% - something economists expect in around a year - and today's data offered some evidence of rebalancing. 

Business investment grew 2.7% in the first quarter from the previous three-month period, the fastest rate of growth since the first quarter of 2013, adding 0.2% to GDP. 

But net trade failed to boost growth, after adding 1% to GDP in the final three months of 2013. Instead, a 0.8% rise in household consumption, double the pace of the previous quarter, provided most of the 0.8% increase in GDP. 

Services output rose by 0.9% on the quarter, its strongest rate of growth since the third quarter of 2011. Industrial output was up 0.7% and construction grew by 0.6%. 

The headline GDP numbers confirmed that Britain, until last year a laggard among the world's affluent countries, now has one of the fastest-growing economies with an annualised growth rate of over 3%. 

Excluding one-off payments related to Royal Mail's pension plan and cash transfers from the Bank of England, public sector net borrowing totalled £11.5 billion, up nearly 2% from April last year.

A Treasury spokesman said the data underscored the need for the government to press on with its plan to eradicate Britain's budget deficit. 

April was the first month of the 2014/15 financial year, during which Osborne aims to lower borrowing to 5.5% of GDP.

Revised ONS figures for the 2013/14 tax year showed borrowing totalled £107.4 billion or 6.59% of GDP, down marginally from an original estimate of £107.688 billion or 6.61% of GDP.