UK economy grows by 0.8%, according to GDP figures

Figures released on Friday (25 October) by the Office for National Statistics (ONS) show ecomonic growth of 0.8% in the third quarter of the year.

The gross domestic product (GDP), which is the main indicator of economic growth, saw an increase of 0.8% between July and September compared to the previous quarter - the best quarterly performance since 2010.

The ONS reports that output increased in all four main industrial groupings within the economy in the third quarter of 2013 compared with quarter two. Output increased by 1.4% in agriculture, 0.5% in production, 2.5% in construction, and 0.7% in services. Output from services is now slightly above its previous peak in quarter one of 2008, prior to the economic downturn.

The significant rise in the construction sector may indicate that house building has been boosted by the Governments' 'Help to Buy' mortgage guarantee scheme.

GDP for July to September 2013 was estimated to be 2.5% below the peak in quarter one of 2008. From that peak to the trough in 2009, the economy shrank by 7.2%.

GDP was 1.5% higher in the last quarter compared with the same quarter a year ago, when the Olympics and Paralympics took place boosting the level of GDP.

The Government welcomed the economic news as a vindication of their economic policy. The Chancellor George Osborne said: "This shows that Britain's hard work is paying off and the country is on the path to prosperity."

Deputy Prime Minister Nick Clegg said the GDP figures "show that we are firmly on the road to economic recovery."

The Shadow Chancellor Ed Balls said: “After three damaging years of flatlining, it’s both welcome and long overdue that our economy is growing again. But for millions of people across the country still seeing prices rising faster than their wages this is no recovery at all."

There has been a cautious welcome from ecomomists. John Longworth, Director General of the British Chambers of Commerce (BCC) said:

“This is the highest quarterly increase we’ve seen in three years, so the economy is clearly moving in the right direction. Our own surveys have consistently shown that businesses are confident and recent economic data has been positive so we have much to be optimistic about. But we are still behind a number of advanced economies such as the US and Germany that have managed to recover the output lost during the economic downturn. Much more needs to be done to transform our economy from being good to being really great. Businesses are in desperate need of better access to finance, and trade promotion has to be prioritised so that firms who are looking to do business overseas are able to take that first step towards exporting.”

The Institute of Directors' chief economist Graeme Leach said: "The outlook looks better than at any time since the onset of the financial crisis. Indeed, our members have more confidence in the economy than at any time since 2008.

"However, strong headwinds remain and the annual growth rate year on year is nothing to get too excited about yet. Though inflationary pressures are likely to remain benign, debt and inflation are rising faster than earnings.

"By far the biggest challenges remain on the supply side, not the demand side. Supply side constraints mean that the current growth spurt is unlikely to extend beyond next year.

"This stage of our economic recovery is likely to be short and sweet, instead of long and strong."

Bank of England governor Mark Carney said in a speech on Thursday evening, that the rate of growth was "towards the top end of the advanced economies", but "coming from a very very low base".

Concerns will remain that other factors such as the squeeze on personal incomes and financial pressures from the Eurozone may partly stem the optimism.