THE UK notched up its seventh successive quarter of growth today but Chancellor George Osborne warned the country faces a “critical moment” amid a darkening picture for the global economy.
Gross domestic product (GDP) grew by 0.7% in the third quarter, according to the Office for National Statistics (ONS) - a slowdown from 0.9% in the previous period.
GDP has now been growing since the start of last year but the figures also showed that the performance of manufacturing in the latest quarter, with growth of just 0.4%, was the weakest it has been since the first three months of 2013.
Meanwhile, the dominant services sector, which represents nearly four-fifths of output and has led the UK out of recession, failed to keep pace with a growth surge of 1.1% in the second quarter, though it still expanded by 0.7%.
Britain is expected to be the fastest-growing major world economy this year, with the International Monetary Fund (IMF) predicting a GDP increase of 3.2%.
But weakness in the eurozone, the UK’s main trading partner, is weighing on prospects and Bank of England chief economist Andy Haldane has signalled that the gloomier picture means there will be no interest rate hike until well into next year.
The latest GDP figures showed that while the economy was 3% stronger in the third quarter than in the same quarter a year ago, this was a slowdown from the 3.2% comparison in the second quarter.
The UK is now 3.4% ahead of its level at the start of the downturn in 2008 but manufacturing is still 4.1% behind and construction 8.2% short. The latter grew by 0.8% in the third quarter.
Mr Osborne said: “Today’s strong growth figures show that the UK continues to lead the pack in an increasingly uncertain global economy. With all the main sectors of the economy growing, it’s clear that our recovery is broadly based.
“But the UK is not immune to weakness in the euro area and instability in global markets, so we face a critical moment for our economy.
“If we want to avoid a return to the chaos and instability of the past, then we need to carry on working through our economic plan that is delivering stability and security.”
Critics of the coalition point to the fact that despite strong growth and record numbers in work, wages are still falling in real terms. Pay growth has been lagging behind inflation for six years.
Shadow chancellor Ed Balls said: “For all George Osborne’s claims that the economy is fixed, most people are still not feeling the recovery.
“Working people are over £1,600 a year worse off since 2010 and these figures now show a concerning slowdown in economic growth too.”
Scotiabank’s Alan Clarke said today’s GDP figure was “not a bad reading by any stretch of the imagination”.
But ING Bank economist Rob Carnell said the Chancellor “may view this as a mixed blessing, after being given a bigger bill for the EU budget thanks to the UK’s relative outperformance of its European Union peers”.
It comes after it emerged that the European Union wants the UK to pay £1.7 billion more for its funding to reflect its better economic performance compared to other states.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “The UK economy held up pretty well in the third quarter.
“But there are some recent signs that it may be coming a little off the boil, partly reflecting the fact that it is not immune to increased global economic uncertainty and weakness in the eurozone.”