Bounce in economy as Britain plc shrugs off royal wedding hangover

THE UK economy ground to a halt in the second quarter of the year, revised figures have shown, but bounced back between July and September with stronger growth than was previously estimated.

Gross domestic product (GDP) grew at 0.6 per cent in the third quarter, revised up from a previous estimate of 0.5 per cent, the Office for National Statistics (ONS) said, while growth between April and June fell to zero from 0.1 per cent.

The third quarter was boosted by better than estimated growth in agriculture, construction and services, while the second quarter was hit by weaker than estimated figures in the services sector.

Economists have warned the third quarter was flattered as the economy played catch-up from the previous three months, which was hit by the extra bank holiday from the royal wedding and impact of the Japanese tsunami, so the overall picture of the year had been left broadly unchanged by the revisions.

Labour Treasury spokeswoman Rachel Reeves said the figures show that the economy has been “flatlining” for the past year, at a time when growth was needed to get unemployment and the deficit down.

“Only a complacent Chancellor would take comfort in figures showing just 0.5 per cent growth in the year since his spending review,” she said.

“This compares to an upwardly revised figure of 3 per cent growth in the previous 12 months, when government policies were supporting rather than undermining the economic recovery.

“The fact is tax rises and spending cuts have crushed confidence and choked off the recovery in Britain over a year ago, well before the recent eurozone crisis.

“Over the Christmas break David Cameron and George Osborne need to wake up to the scale of the jobs and growth crisis facing our country.”

The modest upward revision in growth is a second dose of good news this week for the Chancellor after figures showed that public borrowing was down in November to £18.1 billion, a £2.3bn fall on last year.

Manufacturing, services and trade surveys have been mixed so far in the final quarter, prompting fears that the UK is heading for a double-dip recession.

Tax and spending watchdog the Office for Budget Responsibility recently slashed official forecasts for growth, following a similar downbeat assessment from the Bank of England.

The powerhouse services sector, which makes up some 75 per cent of the total economy, grew at 0.7 per cent in the third quarter, up from a previous estimate of 0.6 per cent.

Agriculture grew at 0.5 per cent in the third quarter, while construction was ahead 0.3 per cent. But industrial production growth was revised down once again to 0.2 per cent from 0.4 per cent, partially offseting improvements in the stronger sectors.

The squeeze on household spending was underlined by figures revealing real disposable income growth slowed to 0.3 per cent in the third quarter from 1.3 per cent in the second.

Government spending was also revised down to 0.2 per cent from 0.9 per cent.