Britain has a mini-boom

BRITAIN is on the road to recovery after “very positive” official figures yesterday showed growth in the economy has reached a nine-year high.

MINI BOOM House building has helped to lead the economic boost MINI-BOOM: House building has helped to lead the economic boost

Experts said the 1.2 per cent boost showed the country would be better placed to protect workers’ jobs and guard against any looming double-dip recession.

The statistics revealed that the economy expanded faster than analysts had predicted and showed an improving picture compared with the same period last year.

Philip Shaw, economist at investment bank Investec, said: “Recent indicators suggest the third quarter of the year got off to a good start.

“It is consistent with the economy getting back on its feet. It’s a reminder the recovery is happening.

“There’s a lot of spare capacity in the economy but a more solid economy means fewer job losses and that’s good news.”

The Office for National Statistics, which said gross domestic product (GDP) – the measure of the country’s economic output –  increased by 1.7 per cent between April and June compared with the same time last year and revised its figure for the second quarter from 1.1 per cent to 1.2 per cent, a figure not achieved since 2001.

Economists said the news proved the UK economy was recovering and said the increase would help to defend the country against severe cuts expected after the Government’s spending review this autumn.

Speaking after the figures were released, Deputy Prime Minister Nick Clegg said: “I don’t know whether the figures will necessarily be a guide for the next quarter. I think most people expect the water to be a bit choppy, bumpy, but hopefully upwards overall.”

Output in the construction industry was said to be behind the unexpected boost after statisticians estimated an increase of 8.5 per cent in the building sector alone. But industry experts also said the upturn had come after the sharpest fall in construction for more than 35 years.

Stephen Ratcliffe, director of UK Contractors Group, said: “Although today’s figures for the second quarter of the year show a sharp increase of nearly nine per cent, the industry is still in a very difficult environment and the figures do not indicate a dramatic recovery in its fortunes.”

Household spending also rose by 0.7 per cent in real terms, supporting this week’s report from the employers’ organisation the Confederation of British Industry that high street sales increased in August.

Lee Hopley, chief economist at the manufacturers’ organisation EEF, said the revised increase in GDP pointed to a resilient economy with levels of investment starting to pick up.

She added: “The rebound in manufacturing we’ve seen over the past nine months appears to be feeding into tentative signs of a recovery in investment which, if continued, should deliver the much needed re-balancing of the economy.

“However, the strong bounce in overall growth remains reliant on consumer spending and restocking, both of which are likely to diminish in the second half of the year, placing greater importance on investment and a pick up in trade. I think there’s still a degree of uncertainty, but this news will take output levels closer to where we were before the recession.

“Strong second quarter growth, which picked up on consumer spending, is positive in terms of what has happened in the past.”

Other experts said economic growth would help to prevent another recession as well as putting the country in a stronger position to weather public spending cuts and pay freezes.

Many called on the Bank of England to keep interest rates low to continue to ease the pressure on the economy. David Kern, chief economist at the British Chambers of Commerce, said: “The upward revision to GDP is good news.

“This puts the UK in a better -than-expected position as we prepare for the austerity measures that will be introduced over the next few years.

“In spite of these positive figures, it is important to bear in mind that the implementation of the tough deficit cutting programme will inevitably have a serious dampening affect on demand and risks of an economic setback remain. Given the fragility of the situation, it would be dangerous to consider raising interest rates soon.

“Businesses still face huge pressures and interest rates must stay as low as possible for as long as possible.”

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