David Cameron hailed a “major milestone” in the recovery as official figures showed Britain had finally emerged from its worst post-war downturn.
Gross domestic product (GDP) grew by 0.8 per cent in the second quarter, taking the size of the economy 0.2 per cent above its pre-recession peak, figures from the Office for National Statistics (ONS) showed.
It marks the end of a period when GDP slumped to 7.2 per cent below its pre-recession levels by the middle of 2009. The stuttering recovery did not take flight until last year when growth began to accelerate.
But Britain is now predicted to be the fastest-growing major world economy in 2014. Yesterday the International Monetary Fund (IMF) raised its GDP forecast for the fourth time in a row to 3.2 per cent
The Prime Minister said: “It’s encouraging news that the economy is larger than pre-crash levels.
“Our long-term economic plan is working and this is a major milestone.” However, critics pointed to the continuing fall in real-terms wages as evidence that the benefits of recovery were not yet filtering through to households.
Meanwhile the ONS figures showed that while the dominant services sector continued to perform well, manufacturing and construction were still struggling.
Chancellor George Osborne said the return to the pre-crash peak was “thanks to the hard work of the British people”. But he added: “There is still a long way to go – the Great Recession was one of the deepest of any major economy and cost Britain six years.”
“Now we owe it to hardworking taxpayers not to repeat the mistakes of the past and instead to continue with the plan that is delivering economic security.”
Shadow Chancellor Ed Balls said it had taken Britain three years longer than the US to return to its pre-crisis peak. He added: “With GDP per head not set to recover for three more years and most people still seeing their living standards squeezed, this is no time for complacent claims that the economy is fixed.”
Yesterday’s figures showed that GDP was 3.1 per cent higher in the second quarter compared with the same period a year ago – the highest such increase since the last quarter of 2007.
The 0.8 per cent growth for the second quarter was primarily driven by the services sector, which accounts for three-quarters of output, and had already surpassed 2008 levels. It grew one per cent in the quarter.
But manufacturing expanded by just 0.2 per cent and remains 7.4 per cent off the pre-crisis peak level while construction shrank 0.5 per cent.
It still lags 10.7 per cent behind the level of six years ago.
Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said: “Policy-makers can’t yet afford to take the summer off.”