Financial News

  • 28 July 2014, 10:47

UK Economy Emerges From Six-Year Downturn

Official figures show the UK economy has emerged from six years of lost growth to return to its pre-crisis peak.

The Office for National Statistics (ONS) said Britain's economy was now bigger than it was before the financial crisis as gross domestic product (GDP) expanded by 0.8% in the second quarter of the year.

The performance matched that of the previous quarter, although today's figure is only a first estimate and subject to revision.

It meant that on an annual basis, growth was 3.1% higher than was measured in the same period last year, leaving total output 0.2% higher than in the first quarter of 2008 - its previous peak.

The measure of GDP per head - taking account of a growing population and weaker productivity - remains below the peak.

In its April to June calculations, the ONS charted 1% quarter-on-quarter growth in the service sector - which accounts for 75% of total UK GDP - while industrial production rose 0.4%.

However both construction and agriculture made negative contributions of 0.5% and 0.2% respectively. Both were hit by the effects of a very wet winter and spring.

The ONS said only the service industry was now bigger than it was before the crisis, with industrial output and construction still 10% smaller.

Chancellor George Osborne said: "Thanks to the hard work of the Britishpeople, today we reach a major milestone in our long-term economic plan."

He tweeted: "We owe it to hardworking taxpayers not to repeat the mistakes of the past.

"Economy bigger than previous peak in 2008 but long way to go - the Great Recession was one of deepest of any major economy & cost UK 6 years."

However many people reacted to the news with scepticism. Posts of Sky News' Facebook page suggested not everyone feels Britain is out of the economic doldrums.

:: Robert Futsal Brassett: "They may declare it. But it don't feel like it."

:: Dorothy Dougan"Just in time for the General Election how fortuitous. So do we all get pay rise now?"

:: Jax Bell - "So NOW can we all get a decent pay rise,MPs 11% everyone who is on benefits/pension 2.5% Working people in North East 1%. Worst Government Leaders in British History"

:: Josephine Hargreaves - "Really? Come out into the real world & talk to the ordinary people to see if its over!"

:: Kerry Livesey - "Good news but let's hope the low paid workers benefit"

The pace of the recoverywill feed into expectations about the timing ofan interest rate rise by the Bank of England though its governor Mark Carney recently suggested it would be tied to improved data on wage growth.

While employment has soared in recent months, salary growth has fallen to 0.3% year-on-year and continues to lag inflation - last measured at 1.9%.

The scenario that has left the Bank fearing the impact of any rate rise on consumers, whose spending remains the biggest driver of economic growth.

Labour's shadow chancellor, Ed Balls, said of the latest GDP figures: "At long last our economy is back to the size it was before the global banking crisis - three years after the US reached the same point.

"But with GDP per head not set to recover for three more years and most people still seeing their living standards squeezed, this is no time for complacent claims that the economy is fixed.

"Wages after inflation are down over 1,600 a year since 2010, housebuilding under this government is at its lowest level since the 1920s and business investment is lagging behind our competitors.

"Labour's economic plan will make Britain better off and fairer for the future."

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