Business groups have given a cautious welcome to the announcement this morning that the UK has avoided a triple-dip recession, with the economy growing by an estimated 0.3% in the first quarter of 2013.
The increase was higher than expected and John Cridland, director general of the CBI, said it confirms the organisation’s view that 2013 will see real growth. After the pick-up in the services sector, the economy now needs a recovery in manufacturing output in the coming months, he added.
Cridland concluded by saying that the government must build on the emerging signs of confidence by getting behind Britain’s entrepreneurs and exporters.
David Kern, chief economist at the British Chambers of Commerce, pointed out that, although services output is now above its pre-recession levels from 2008, both construction and manufacturing are still lower.
“The main priority remains combining a realistic deficit cutting programme with policies that make it possible for the economy to achieve sustainable growth,” he said.
Meanwhile, Terry Scuoler, chief executive of EEF, the manufacturers’ organisation, highlighted the fact that the economic challenges faced by the UK are shared by much of the rest of the world, particularly Europe, and are “hampering manufacturing’s efforts to export our way to growth.”
Chancellor George Osborne responded to the GDP announcement by saying that the figures are an “encouraging sign” although Ed Balls, the shadow chancellor, argued that the economy is only “back to where it was six months ago.”
In its preliminary estimate for the quarter the Office for National Statistics (ONS) noted that GDP was 0.4% higher in the first three months of 2013 than in the third quarter of 2011, which means that it has been broadly flat over the last 18 months.
The most significant contribution to GDP growth in the first quarter of 2013 came from services, and there was a smaller contribution from production. These upward contributions were partly offset by a decline in construction output.
Overall, the bad weather in this year’s first quarter is thought to have had a limited impact on GDP growth. Evidence suggests that the snow and low temperatures reduced retail output in January and March but boosted demand for electricity and gas in February and March, which resulted in higher output in the energy supply industries.
Five years ago, before the global financial crisis led to a sharp fall in output, the UK economy peaked in the first quarter of 2008. The lowest level was registered in the second quarter of 2009. GDP fell 6.3% from peak to trough, the ONS said. In the first quarter of 2013 the UK’s GDP was estimated to be 2.6% below the 2008 peak.