Figures for GDP output set to be revised upwards

The double-dip recession may not be as deep as originally feared, as analysts have forecast an upward revision to gross domestic product (GDP) figures on Friday.

The second estimate of GDP – a broad measure for the total economy – is expected to show a 0.5 per cent decline between April and June, against the first estimate of a 0.7 per cent drop.

The slight improvement is set to be driven by better-than-estimated performances from the construction and industrial production sector, while a lift to services output may also be on the cards.

However, City experts warned the underlying picture of a struggling economy, mired in the longest double-dip recession since the 1950s, will remain.

As a result, any such improvement is unlikely to relieve pressure on Chancellor George Osborne to ease his strict austerity measures, which some have said are choking off the recovery.

Victoria Clarke, economist at Investec, said: “Such an outturn would make for less scary headlines, whilst still indicative of a UK economy stuck in the mud.”

The 0.7 per cent decline in the first quarter was driven by a 5.2 per cent drop in construction output, a 1.3 per cent quarterly fall in industrial production and a 0.1 per cent drop in service sector output.

The additional bank holiday for the Queen’s Diamond Jubilee in June, which knocked out a day of output, also accounted for some of the weakness.

But recent sector data from the Office of National Statistics (ONS) showed a smaller decline of 3.9 per cent over the quarter for construction and a smaller 0.9 per cent for industrial production.

The revisions were put down to a smaller impact from the Jubilee effect – which could also be applied to the powerhouse services sector, which makes up 75 per cent of the total economy.

Britain’s resilient jobs market is expected to have helped the Government’s battered public finances, with official figures for July set to show a welcome boost from tax revenues.

July is a strong month for tax receipts, as both corporation tax and self-assessment income tax payments are due.