Scaffolders work on a building site in west London yesterday. Britain’s economy is now bigger than it was before the financial crisis struck six years ago after strong growth in the second quarter that keeps it on track to lead the way among developed countries this year.
Britain’s economy grew strongly in the second quarter, overtaking the size it achieved before the global financial crisis, data showed yesterday in the latest sign of robust recovery.
The latest figures, along with a sharp fall in unemployment to the lowest level for five years, give a boost to the government before a general election next year.
Gross domestic product (GDP) expanded by 0.8% between April and June from the first quarter, when it grew by the same amount, the Office for National Statistics (ONS) revealed in a statement that matched market
expectations.
The data was published one day after the International Monetary Fund forecast Britain, a member of the European Union but not of the eurozone, would outpace the world’s major advanced economies this year.
The economy is now 0.2% bigger than before its pre-crisis peak in early 2008, the ONS added, lifting Conservative Prime Minister David Cameron’s coalition government, which has pursued austerity and tax-raising policies since it won power in 2010.
The coalition, comprising also minority partners the Liberal Democrats, has sought to slash a record deficit inherited from the previous Labour administration, in order to ward off tensions arising from the eurozone debt crisis, while lifting investor confidence and boosting growth.
“Thanks to the hard work of the British people, today we reach a major milestone in our long-term economic plan,” said finance minister George Osborne in response to the latest data.
Opposition politicians argue that ordinary households are facing falling pay in real terms, and have yet to benefit fully from the recovery.
Britain’s economy escaped from recession in late 2009, after a fierce downturn rooted in the global financial crisis, staging a stuttering recovery that began to accelerate last year.
The ONS added yesterday that Britain’s recession shrank the economy by a total of 7.2%, from peak to trough. Amid the brightening economic backdrop, the Bank of England appears on course in the coming months to raise its main interest rate from a record-low level of 0.50%, where it has stood since March 2009 to stimulate growth.
Economic output in the second quarter was lifted by particularly strong growth in the nation’s services sector, which accounts for three-quarters of overall activity and surged by 1%.
That helped eclipse contractions to agriculture and construction, while manufacturing grew by just 0.2%.
British GDP was 3.1% higher in the second quarter compared with the same period a year earlier. That was the highest year-on-year increase since the final quarter of 2007.
The figures were published one day after the International Monetary Fund raised its 2014 economic growth forecast for Britain for the fourth time in a row to 3.2%.
Bank of England governor Mark Carney this week indicated that the central bank needed to start raising its interest rate in the months ahead, pointing to Britain’s economy rapidly gaining strength.
But Carney, speaking at a Glasgow conference before the Commonwealth Games opening ceremony, said there was no “preset course” for when the central bank would start lifting borrowing costs, while any hikes would be “gradual and limited”.