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There was bad news for chancellor George Osborne as official figures showed growth in the UK economy was slower than initially thought in the third quarter, along with a deterioration in public finances last month. The UK economy grew by 0.9% in the third quarter of the year according to the Office for National Statistics (ONS), less than the 1% previously estimated.
Third quarter GDP growth was the strongest since the third quarter of 2007, but much of that reflected a one-off boost from the London Olympics and a rebound from the second quarter when an extra public holiday dented output. The UK’s services sector, which accounts for the majority of gross domestic product (GDP), or the value of all goods and services produced in the UK, grew by just 0.1% in October, indicating a weak start to the fourth quarter. Output from manufacturing and services sectors grew less than expected, But the decline in output from the construction industry was slightly less than previously thought.
Ross Walker, analyst at RBS, said “We had 0.9%, it looked quite a close call between 0.9% and 1.0%. But, with the monthly industrial production numbers showing small downward revisions, we thought it would probably be trimmed. I suppose the Q3 number reinforces the weakness”. Chuka Umunna, shadow business secretary, said: “The ONS confirms our economy is bumping around the bottom and yet Cable and Osborne persist with their failing plan while others suffer”.
Public sector net borrowing, excluding financial interventions such as bank bailouts, was £17.5bn in November, up £1.2bn on the same month last year. Economists had predicted borrowing would fall slightly to around £16bn. The bigger than expected increase adds to the problems faced by chancellor George Osborne as he struggles to reduce public borrowing in the face of a sluggish economy. This takes total borrowing so far this financial year to £92.7bn, £8.3bn more than the same period in 2011.
James Knightley, analyst at ING Bank, said: “All in all, the UK appears to be ending 2012 not in particularly great shape, and as such we suspect the Bank of England has more work to do with further policy stimulus likely in early 2013, especially if the worst fears over the US fiscal cliff materialise”.
