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News : UK Economy Last Updated: Jan 28, 2014 - 1:05 PM


UK economy grew by 1.9% in 2013 - - strongest rate since 2007
By Finfacts Team
Jan 28, 2014 - 12:54 PM

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The UK economy grew by 1.9% in 2013, its strongest rate since 2007, according to the Office for National Statistics (ONS) today. GDP (gross domestic product) increased by 0.7% in the fourth quarter of 2013.

The largest contribution to the increase came from the services sector, which increased by 0.8%.The increase in GDP followed growth of 0.8% in Q3 2013. In the latest quarter there was widespread growth, with increases in three of the four main aggregates. Output increased by 0.5% in agriculture, 0.7% in production, 0.8% in services and decreased 0.3% in construction.

The UK's service sector - - which accounts for more than three-quarters of economic output - - rose by 0.8% in the fourth quarter, the ONS said, matching its performance in the previous quarter. And the manufacturing sector grew 0.9%.

Economic output remains 1.3% below its 2008 first quarter level.

"We've seen growth in most parts of the economy," said Joe Grice, chief economist at the ONS, while George Osborne, chancellor of the exchequer, 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."

Ed Balls, Labour's shadow chancellor, said: "Today's growth figures are welcome and long overdue after three damaging years of flatlining.

"But, for working people facing a cost-of-living crisis, this is still no recovery at all."

GDP was 2.8% higher in Q4 2013 compared with the same quarter a year ago. GDP is estimated to have increased by 1.9% between 2012 and 2013.

There was an upwards contribution from the production sector, which grew by 0.7%, with manufacturing increasing by 0.9%.

The ONS said today that GDP in the UK grew steadily from 2000 until early 2008, at which point a financial market shock affected UK and global economic growth. Up until that point, services in the UK had continued to grow steadily, while production output had been broadly flat over the same period. Construction activity grew strongly in the early part of the decade and although there was a temporary decline in the mid-2000s, this was reversed by the end of 2007. The deterioration in general economic conditions during 2008/09 was more acute in the construction and production industries, but less pronounced in the services industries.

Economic growth resumed towards the end of 2009, but at a slower rate than the period prior to 2008. The services industries grew steadily, if slowly, during this period, with activity exceeding the level previously seen in early 2008 by Q3 2013. By contrast, production and construction activity grew in 2010 but did not sustain this growth, and as a result have not yet returned to their pre-downturn peaks of activity. Although there has been growth across all industrial groupings except agriculture (which accounts for less than 1% of GDP and is highly volatile), when comparing Q4 2013 with Q4 2012 the service industries remain the primary contributor to economic growth.

From the peak in Q1 2008 to the trough in Q2 and Q3 2009, GDP decreased by 7.2%. Previous economic downturns in the early 1980s and early 1990s did not see the same level of impact on GDP. In the early 1990s downturn, GDP decreased by 2.9% from the peak in Q2 1990 to the trough in Q3 1991. . From Q2 1979 to Q1 1981, a period which included a quarter of positive growth, GDP decreased by 5.9%; over five consecutive quarters of falling GDP beginning in Q1 1980, GDP decreased by 4.6%.

The figures came as the CBI, the UK's leading business lobby group, unveiled its new monthly Growth Indicator, which showed the volume of output in the three months to January grew at the fastest pace since late 2007.

John Cridland, CBI director-general, said: “The economy is growing and the recovery gathering momentum. This is good news, and we’re seeing improvement across many different sectors.

“Our new Growth Indicator echoes this building confidence, showing that output in last three months grew at the fastest pace since late 2007, with strong performances in business and professional services, and manufacturing.

“This is a strong platform for an even better year in 2014, and we expect the economy to continue to strengthen.”

Howard Sears, founder of  Astuta, a small business investment firm said: "The economy is back with a bang. After last week's strong jobs numbers, there is every reason to believe the economic recovery is in full swing.

"There is certainly a lot more confidence in the small business community. Companies are starting to invest for the future rather than protect against it.

"The recovery of the property market has certainly had a major positive impact on consumer sentiment. People are starting to spend where perhaps they would have saved a year or two ago.

"For the economic recovery to gain momentum, we still need to see more appetite from the banks to lend to slightly higher risk firms.

"Nobody wants to return to the days of lax criteria but there needs to be more realism around business lending. Many perfectly viable and financially strong SMEs are still unable to secure the finance they need to grow.

"While the economy may be back on song, many banks are still tone deaf to the unique demands of many companies."

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