Economy set for fastest expansion in six years

Britain’s economic growth is expected to have slowed slightly in the final three months of last year, although the annual rate of expansion is predicted to have hit the highest level since 2007.

The forecast, from the National Institute of Economic & Social Research (NIESR), came as official figures yesterday showed the construction industry suffered its heaviest slump for 17 months in November while an upturn in manufacturing came to a halt.

The NIESR said the economy is likely to have grown by 0.7 per cent in the final quarter of 2013, down from the previous quarter’s 0.8 per cent, but enough to lift full-year growth to 1.9 per cent – faster than the 1.6 per cent predicted by the Bank of England and well above 2012’s growth of 0.3 per cent.

However, the Office for National Statistics (ONS) said output from construction fell by 4 per cent month-on-month in November, with private house building down 3.2 per cent despite the resurgence in the property market. Separate ONS figures showed that manufacturing output was flat during November, and the previous month’s increase was revised down.

Stephen Gifford, the CBI’s director for economics, said: “Although these figures are disappointing, they only reflect one month’s performance and there is a growing sense among firms that the recovery is taking hold.”

Samuel Tombs, of Capital Economics, said the strength of the UK’s dominant services sector suggested fourth-quarter growth will have matched the 0.8 per cent increase seen in the previous three months.

But Howard Archer at IHS Global Insight said there was a “very real risk” that growth could have fallen below 0.7 per cent amid signs consumer spending was “no more than respectable over Christmas”.