Rise in UK economic growth beats expectations

The Momentum UK Team 22 December 2011

The UK economy has grown slightly higher than anticipated with GDP growth from July to September up from 0.5% to 0.6%.

The Office of National Statistics released the figures which have seen a slight boost from the service and construction sector. Figures from the second quarter - April to June - however, have been revised down from 0.1% to show no economic growth at all.

Despite recent growth the previous quarter's poor performance meant that the annual rate of expansion was left unchanged at 0.5%. Economists have warned that the year is likely to end in minimal growth or even a contraction and that Britons should still brace themselves for a recession in the early part of next year.

James Knightley from ING told the BBC: "The sovereign debt crisis is really hurting [UK] businesses. We could turn back into recession in the next couple of quarters."

"We are are looking at flat growth in the current quarter, maybe a slight contraction of 0.1%. Early next year is key, when the debt crisis could come to a head - any [potential] credit crunch would be a massive constriction on the economy."

According to the Ernst & Young Item Club, an independent economic forecasting group, the deteriorating manufacturing sector and recent eurozone crisis are predicted to affect the economy in the early start of 2012.

Cautious consumer spending, fiscal tightening and fewer business investments have also stunted economic activity.

Government expenditure however was today revised down to 0.2% from 0.9% as borrowing came down from £20.4bn in November 2010 to £18.1bn as part of the coalition's austerity drive. This is lower than what the Office for Budget Responsibility's forecast predicted would be £127bn of borrowing for the whole financial year.