Summer Growth Does not Mean Economic Recovery says IoD

The UK economy grew faster than expected over the summer months, but the figures don’t mean the recovery will continue, the Institute of Directors (IoD) has warned.

Research by the Office for National Statistics found that the economy grew by 0.5 per cent between July and September, up from a disappointing 0.1 per cent in the previous three months. The growth was helped by a good performance from the services sector which expanded by 0.7 per cent, up from 0.2 per cent previously.

But many economists put the increase down to delayed spending from the second quarter, which was dampened by one-off effects such as the Japanese earthquake and the extra bank holiday.

The IoD’s chief economist Graeme Leach said that GDP growth was “almost certain to flatten off, or even fall” in the fourth quarter, due to postponed business investment and consumer caution.

He added:

“You can’t see the road ahead from the rear-view mirror. The GDP figures are welcome news, but they fail to capture the dramatic events of recent weeks in the euro zone. We don’t think the euro crisis is over ― it will continue to haunt recovery prospects in the UK.”

The British Chambers of Commerce’s chief economist David Kern said the figures were better than expected, but called the year’s weak growth particularly disappointing.

“Fears of a recession are still unfounded, but there are risks for the economy ahead. Early indications from the fourth quarter are concerning, and if the situation in the euro zone worsens there could be serious adverse repercussions for the UK.”

National chairman of the Federation of Small Businesses John Walker said that the Government needed to take clear action to help small firms grow.

“The recovery remains fragile following a year of stagnant growth. We need to see the Government address this in its Autumn Statement on 29 November.”

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