Recovery weaker than thought

The UK economy has been growing less strongly than previously thought this year, official figures have shown
The UK economy has been growing less strongly than previously thought this year, official figures have shown

The UK’s economic recovery has been weaker than previously thought, according to revised official figures suggesting that growth this year could be lower than previously forecast.

Data from the Office for National Statistics (ONS) also showed the economy was increasingly reliant on household spending as business investment falls at its fastest rate in five years.

The revised figures showed that while third quarter growth was in line with earlier estimates at 0.7 per cent readings for the previous five periods have all been lowered.

Gross domestic product (GDP) in the third quarter was only 2.6 per cent ahead of the same period last year, down from a previous estimate of three per cent.

Meanwhile, Britain’s current account deficit has soared to £27bn, equalling a record six per cent of GDP and described as unsustainable by one business group.

Samuel Tombs, senior economist at Capital Economics: “The latest set of national accounts leave the economic recovery looking more fragile than it seemed before.”

He said the revisions mean annual growth was likely to be 2.6 per cent lower than the official forecast which was recently revised up to three per cent in Chancellor George Osborne’s Autumn Statement.

The latest data presents a pre-Christmas blow for Mr Osborne after last week’s economic figures painted a brighter picture with borrowing down and real terms pay picking up as inflation sank to a 12-year low of one per cent.

The revisions mean the recovery is not as advanced as hoped, with the economy now 2.9 per cent bigger than its pre-recession peak in ‘08, rather than 3.4 per cent.

Figures also showed household spending increased by 0.9 per cent in the third quarter, its strongest since the second quarter of 2010 and accounting for the lion’s share of GDP growth in the period.