UK economy grows by 0.5% in first quarter of 2011

 

George Osborne: 'Around the world we are facing some choppy economic conditions'

The UK economy grew by 0.5% in the first three months of the year, official figures have shown, reducing the risk of a double-dip recession.

The chancellor welcomed the return to growth, which followed a contraction of 0.5% at the end of 2010.

But Labour said the economy was flat and the recovery had been "choked off".

The manufacturing and services sectors had performed well, the Office for National Statistics said, but construction output had fallen sharply.

Mixed response

Chancellor George Osborne said: "It is good news that the British economy is growing. It is particularly good news that manufacturing is growing so strongly, when we have had such an unbalanced economy in recent years, and manufacturing has not done so well.

"Jobs have been created since the New Year and government borrowing is down," he added.

Ed Balls, Labour's shadow chancellor, responded: "If George Osborne thinks zero growth over six months is good news and a sign that the recovery is on track then he is more out of touch and out of his depth than I feared. "

Analysis

For once, the first estimate for growth in the first quarter is in line with expectations - but it would be hard to argue that it's good news.

Not so long ago, many were hoping for a strong bounce back from the slowdown at the end of 2010.

Instead, the figures suggest that the UK economy has barely grown since the summer - though of course that hides a lot of variation.

Some sectors, such as manufacturing, are doing well, and others are struggling to move ahead.

'Fragile recovery'

Economists gave a mixed response to the figures.

David Kern, the chief economist at the British Chambers of Commerce, said: "These figures were mixed and well below the Office for Budget Responsibility prediction that the economy would grow by 0.8% in the quarter.

"Given the fragility of the recovery, it is vital for the government to persevere with policies that support growth, and remove the obstacles that prevent businesses from creating jobs and exporting."

Growth in manufacturing continued to be strong, at 1.1%, the same as the previous quarter.

The GDP also figures showed that the services sector had returned to growth, after contracting during the bad weather at the end of last year. This had particularly been the case with hotels and restaurants, the ONS said.

However, construction - one of the worst hit areas in the last quarter of 2010 - was down by 4.7% at the start of 2011.

GDP graphic

Ross Walker, from RBS Financial Markets, said that as new data came in, the picture was likely to improve: "You do have what looks to me like a surprisingly large fall in construction output. Do we really believe that the level of construction output was lower in January than in December? We may well see some revisions here."

These figures are an initial estimate and will be revised at least twice in the coming months as more information is gathered.

'Uncertainty'

The low rate of growth could lessen the chance of an early interest rate rise by the Bank of England to combat inflation, which is currently running at 4%, analysts say.

"We are expecting the Bank of England to raise rates in August," said Deutsche Bank economist George Buckley, "but it is far from certain whether they will do that".

Start Quote

Hairdresser Abbie Jackson cuts a client's hair

A lot of my clients have told me they are being affected by the cuts and we expect it to start showing on our business as we continue through 2011”

End Quote Abbie Jackson Owner, Marie Claire hair salon, Hull

"We will have the second quarter GDP numbers by then, but the problem is they may have been negatively affected by the royal wedding and two back-to-back bank holiday weekends which will depress production.

"It is still very uncertain. All of these figures are being affected by a lot of volatility, by holidays, the weather, snow. It has all had a big impact on the numbers.

Lending lags

The Prime Minister, David Cameron, said the growth in manufacturing indicated that the economy was moving away from its reliance on the service sector.

But he added that bank lending was still a stumbling block: "On the banks, we have an agreement with them they must increase their lending to businesses, large and small, and that needs to happen."

Separate figures released on Wednesday from the British Bankers' Association (BBA) showed that total net lending to companies fell in March by £4.7bn compared with a year ago, a slightly bigger fall than in February.

The BBA said in a statement that weak trading activity meant businesses were less likely to borrow money for expansion, and most were trying to pay down debts.

 

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +15

    Comment number 266.

    We run a small construction business, that has struggled but survived the last three years. ONLY through our own hardwork. The bank we use hasn't offered a thing and has in fact made things worse. If our government want to see things turn around they must invest in and support small businesses. We have kept 12 men going and their families. We are the Domestic Product!

  • rate this
    +2

    Comment number 137.

    I've worked in recruitment and staffing for 20 years, the last 10 in the Telecommunications sector. Since Oct2010 we have seen a steady rise in vacancies and people hired, from office staff to senior management, nationwide, now almost to pre-recession levels. So it depends which sector you are in, and where your skills lie. Across the board the consensus is optimistic in the PRIVATE sector.

  • rate this
    +5

    Comment number 134.

    Big deal. Whilst facing huge cuts to public services and jobs and ever-rising living expenses, are we to somehow feel grateful for this - a figure which is probably contrived anyway? I suggest any growth has come about due to the hard-working, stoic nature of the British people, and is in spite of a completely naive and out of touch government.

  • rate this
    +7

    Comment number 64.

    Is it ever possible for ANYONE to make a non-cynical and positive comment to news like this?? Well, I will.

    0.5% growth. Excellent news! Better than no growth at all! Here's to a happy future!

  • rate this
    0

    Comment number 43.

    It's a good sign. Growth in manufacturing is more promising. Its' not a magic from the new government as they did not do anything to support the private sector growth.

 

Comments 5 of 12

 

More Business stories

RSS

Features

  • Peaky Blinders publicity shotBrum do

    Why is the Birmingham accent so difficult to mimic?


  • Oliver CromwellA brief history

    The 900 year story behind the creation of a UK parliament


  • Image of Ankor Wat using lidarJungle Atlantis

    How lasers have revealed an ancient city beneath the forest


  • TheatreBard taste? Watch

    Are trailer videos on social media spoiling theatre?


  • Agents with the US Secret Service, such as this one, are responsible for guarding the presidentHard at work

    White House break-in adds to Secret Service woes


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.