Osborne gleeful over GDP growth

Gross domestic product (GDP) increased by 1.9 per cent in 2013 and has now recovered the lion’s share of output lost in the recession, according to the Office for National Statistics (ONS).

The pace of recovery slowed slightly in the fourth quarter of last year to 0.7 per cent but economists are predicting an annual improvement of up to 3 per cent for 2014.

Labour and the unions say this has yet to feed through to pay packets, with wage growth lagging behind inflation, and that a recovery led by house prices and consumer debt could prove unsustainable.

GDP remains 1.3 per cent below its pre-recession peak in the first quarter of 2008.

But ONS chief economic adviser Joe Grice said four-fifths of the decline in the economy during the downturn has now been recovered and that after four successive quarters of growth in 2013, it “does seem to be improving more consistently” now.

Mr Osborne said: “These numbers are a boost for the economic security of hard-working people. It is more evidence that our long-term economic plan is working.

“But the job is not done, and it is clear that the biggest risk now to the recovery would be abandoning the plan that’s delivering jobs and a brighter economic future.”

Prime Minister David Cameron tweeted: “The GDP figures are another sign our long-term economic plan is working - more growth means more jobs, security and opportunities for people.”

But shadow chancellor Ed Balls said: “For working people facing a cost-of-living crisis this is still no recovery at all.

“And with business investment still weak, construction output down and housing demand outstripping housing supply, this is not yet a recovery that is built to last.”

TUC general secretary Frances O’Grady said: “Any return to growth is welcome, but this is the wrong kind of recovery and is two years late.

“The recovery is yet to reach whole swathes of the country or feed into people’s pay packets. This must change if the benefits of recovery are to be felt by both businesses and workers.”

The GDP figures come a year after it was feared that the economy was about to enter an unprecedented “triple-dip” recession and months after the Chancellor came under pressure from the International Monetary Fund (IMF) to rethink his austerity strategy.

But the IMF has since sharply upgraded UK forecasts and the ONS data shows a pace of growth for last year that has not been better since 2007 when it was 3.4 per cent. In 2012, growth for the whole year was just 0.3 per cent.

Yesterday’s figures were in line with market expectations but a strongly improving economic performance, together with falling unemployment and low inflation are seen as putting pressure on the Bank of England to cut interest rates.

However policy makers have indicated they are in no hurry to lift the cost of borrowing even if joblessness falls to the threshold of 7 per cent which it has set for considering a rate hike.

The slowdown in quarterly growth to 0.7 per cent, though expected, came as a disappointment to some in the City after the economy improved by 0.8 per cent in each of the previous two periods. It rose by 0.5 per cent in the first quarter.

The dominant services sector, which accounts for three quarters of UK economic output, grew by 0.8 per cent in the last three months of 2013. This represents up to 0.6 per cent out of the overall 0.7 per cent growth in the period.