UK economic growth down, but still strong

UK growth has fallen – but Britain’s economy is still expanding at a healthy rate.

The first estimate of Gross Domestic Product (GDP) in the third quarter of 2014 revealed that the level of output grew by 0.7 per cent.

Although this represents a slowdown on the second quarter figure of 0.9 per cent, the figure remains very positive and one notable underlying feature of the data was that all four component categories of output were in positive territory; agriculture expanded by 0.3 per cent, production by 0.5 per cent, services by 0.7 per cent and construction came top at 0.8 per cent.

The level of GDP is now three per cent higher than a year ago and the UK output level has reached 3.4 per cent higher than the pre-recession peak. It had previously been believed that the 2008 output level was only reached in the second quarter of this year, on the basis that the 2008-09 recession saw the economy contract by 7.2 per cent. However, this has subsequently been recalculated to six per cent.

Despite the UK economy being larger as a whole, only the service sector is now bigger than it was at its 2008 peak.

For those involved in dealing with business risk, a key issue in the next few months will be whether or not the UK economy will see GDP growth gradually decline, under pressure from factors such as the weaknesses of major eurozone economies like France and Germany, the political uncertainty in Ukraine and fears of an Ebola pandemic.

Commenting on the figures, European economists at asset management firm Shroders Azad Zangana said the growth rate certainly remains healthy, but uncertainties are likely to grow over the coming months while the rise in GDP slows.

He said: “Looking ahead, we expect a similar growth rate in the final three months of the year, but forecast a further moderation in growth in 2015 as uncertainty over the general election begins to weigh on confidence, and fiscal consolidation post the election hits domestic demand.”

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