UK economic growth reaches three-year high

The UK economy grew at its fastest pace for more than three years in the last quarter, as the broadly based recovery accelerated.

Official figures released yesterday showed the economy expanded 0.8 per cent in the three months to September, up from 0.7 per cent in the second quarter.

Chancellor of the exchequer George Osborne celebrated the strong figures tweeting: “This shows that Britain’s hard work is paying off and the country is on the path to prosperity.”

This month, the International Monetary Fund dropped its criticism of Mr Osborne’s austerity drive and revised upwards the UK’s growth forecast for this year by more than any other leading economy.

Healthy growth
The main components of the index, production, services and construction, rose by 0.5 per cent, 0.7 per cent and 2.5 per cent, respectively. Within production, manufacturing grew by a healthy rate of 0.9 per cent.

The output from services is slightly above the pre-recession peak in 2008, but output in production industries and in construction remains more than 12 per cent below the 2008 peak level. Output in the third quarter was 1.5 per cent larger than last year, but still 2.5 per cent below where it was before the financial crisis struck.

But some of this gap can be explained by the fall in North Sea oil and gas production, according to Simon Ward, chief economist at Henderson Global Investors. He pointed out that non-oil output was just 1.6 per cent below peak in the third quarter.

The UK economy is now larger than the Bank of England expected it to be at the end of the year. In its inflation report in August, the bank forecast growth in the third quarter to be 0.5 per cent, although it then revised its forecast to 0.7 per cent. – Copyright The Financial Times Limited 2013