UK GDP growth revised upwards


Plan to ban rip off pension fees

The UK economy grew more strongly than previously thought this year, according to revisions to official figures.

Gross domestic product (GDP) rose by 0.5% in the first quarter of 2013, up from a previous estimate of 0.4%, and by 0.8% in the second quarter, up from 0.7%, the Office for National Statistics (ONS) said.

The figure of 0.8% for the third quarter remains unchanged but the revisions mean GDP is closer to its pre-recession peak than previously thought.

Britain is 2% off its pre-crisis level at the start of 2008, rather than 2.5% as previously thought, adding to hopes that the end of the prolonged economic downturn is close at hand.

The revisions also showed that 2012 growth was 0.3%, revised up from 0.1%.

However, a slew of further data from the ONS is likely to fuel concerns about the nature of growth.

Britain's current account deficit with the rest of the world in the third quarter rose to £20.7 billion, or 5.2% of GDP - the highest percentage level for 24 years.

It came as the trade deficit widened, UK earnings on foreign investments fell, and foreign earnings on UK investments increased.

Meanwhile household spending in the third quarter was 2.5% higher than a year ago, the highest comparable growth since the first quarter of 2008.

Business investment saw a welcome rise of £800 million to £53.6 billion compared with the previous quarter, though this has been largely flat over the last four quarters, ranging between £52 billion and £54 billion.

Elsewhere, public sector borrowing - excluding the effect of bank bailouts - was £16.5 billion in November, up £900 million on the same month last year.

Central government receipts were up 4.6% to £41.2 billion as VAT and the income tax take rose, as did stamp duties - which were up by 23%, or £200 million.

Spending by central government fell by 1.8%, or £1 billion, to £52.9 billion, including a £300 million fall in net social benefit expenditure.

However, despite these improvements for Whitehall's finances, the overall borrowing figure rose because of changes to the way local authorities are funded.

Underlying public sector net debt rose to a new monthly record of 76.6% of GDP, with the previous high of 76.5% set in September.

Revisions to the third quarter performance of the economy showed that the construction sector - buoyed by Government initiatives such as Help to Buy - did better than previously thought.

It grew by 2.6%, revised up from 1.7%. Services also did better, expanding by 0.8% compared with the previous estimate of 0.7%.

Manufacturing fared worse, revised down by 0.1% to 0.8% growth.

Howard Archer, chief UK and European economist at IHS Global Insight, said the revisions to past GDP data meant growth for this year is likely to be 1.5% - up from a previous forecast of 1.4% - and could be as high as 1.6%.

But Samuel Tombs, UK economist at consultancy Capital Economics, said the figures sowed doubts about the sustainability of the recovery.

"While the second estimate of quarterly GDP growth of 0.8% in the third quarter was unrevised, the sources of that growth continue to cause some alarm," he said.

"The economy's growth spurt seems to be exacerbating existing imbalances in the economy, rather than helping them to heal."

He said public finance figures also made for "somewhat gloomy reading", suggesting borrowing could be on course to overshoot the Office for Budget Responsibility's latest forecast of £111 billion for the 2013/14 fiscal year by around £1 billion.

A Treasury spokesman said: "Today's data show that the recovery has been stronger than previously thought and that the Government's long-term economic plan is working.

"But risks remain and the job is not done, so the Government will go on taking the difficult decisions needed to deliver a responsible recovery for all."

Deputy Prime Minister Nick Clegg said: "Today's figures are yet further proof that we are on the road to economic recovery.

"It hasn't been an easy journey but this Government has firmly set Britain on the right course, helping to create 1.6 million new private sector jobs since the election.

"We must continue to work hard to build a stronger economy and do it fairly - with investment in jobs and measures such as the increased personal tax allowance putting more money in the pockets of hard-working people."