UK Post-Recession Growth 'Stronger Than Previously Estimated'

UK Post-Recession Growth 'Stronger Than Previously Estimated'
|

The UK economy emerged from the recession more strongly than previously thought, according to revised official figures.

The latest revisions from the Office for National Statistics (ONS) show that the economy is now estimated to be 5.9% above its pre-recession peak, compared to initial estimates of 5.2%.

It said that growth was stronger between 2011 and 2013 than previously thought and the economy passed its pre-downturn peak in the second quarter of 2013, one quarter earlier than previous estimates.

The ONS data also confirmed UK gross domestic product (GDP) growth of 0.7% for the second quarter, driven by the dominant services sector, up from a disappointing 0.4% in the first quarter of the year.

Economists say these revisions from previous years will give a boost to Chancellor George Osborne ahead of his spending review and autumn statement in November.

The Chancellor will be under less pressure to slash spending, as this extra growth means tax revenues can be revised upwards.

In another welcome boost for the economy, official figures also showed Britain's current account deficit narrowed sharply in the second quarter thanks to a surge in exports and a growth in earnings on investments overseas.

The UK's current account deficit reduced to £16.8 billion in the second quarter, down from £24 billion in the previous three months, according to the ONS.

That makes the deficit equivalent to 3.6% of GDP, down from 5.2% in the first quarter.

A Treasury spokesman said: "These new figures from the ONS show that the UK was the fastest growing G7 economy in both 2013 and 2014.

"Coupled with family income growing by 3.3% in real terms over the last year and the smallest trade deficit since the late 1990s, this is further evidence that our long term plan to secure the recovery has laid the foundations for a stronger economy.

"But we still face risks from the global economy so we should continue working through our long-term plan to build a resilient economy."

But signs such as slowing retail sales and disappointing manufacturing and construction data point to a slowing of third quarter GDP, perhaps to 0.5%.

IHS Global Insight chief UK and European economist Howard Archer said that the "fundamentals still look broadly positive for the UK, particularly for the consumer".

He added: "While increased global economic uncertainty poses a downside risk, the UK economy can hopefully recover from its current soft patch, resulting in overall GDP growth of 2.4% in 2015."