Fastest Growth in UK Economy Since 2007
New data shows that the UK economy grew by 1.9% last year, at the fastest rate in six years.
Official Gross Domestic Product (GDP) figures from the Office of National Statistics (ONS) indicate that 2013 had the best growth rate since 2007.
From a peak in Q1 of 2008, GDP fell to a low in 2009. Whilst last year’s figures are as much as 1.3% below the Q1 2008 high they are still being seen as an encouraging sign.
The Chancellor, George Osborne, seized upon the figures to say that they were a clear sign that the coalition government’s long-term economic plans were working.
In a statement to the BBC, Mr Osborne said that there was "plenty more to do" but the UK economy was "heading in the right direction".
Looking closely at the figures, there was growth in Q4 of 2013 in agriculture, production and services but the construction sector did see a fall in output.
The new CBI Growth Indicator, also released this morning, shows similar positives, mirroring the fastest growth rate since 2007. The outlook for the next quarter also looks upbeat.
The CBI Growth Indicator is a new monthly report combining the business organisation’s economic surveys covering manufacturing, retail and services in as much as 75% of the private sector economy.
Katja Hall, Chief policy director at the CBI, said:
“A picture is unfolding of a real upsurge in output across much of the UK economy. Many firms in many sectors are feeling brighter about their prospects than they have for a long time, showing the recovery is gaining traction.”
“We certainly need companies investing more and creating a bigger footprint in fast-growing markets, and while some risks remain, we expect the economy to continue to strengthen through 2014.”
The news of the better than expected economic growth figures are causing economists to speculate that the current historic low interest rate of 0.5% could be soon increased.
Bank of England Governor, Mark Carney, had previously provided forward guidance that the base rate would only increase if a number of factors came into play, one of which being the unemployment rate falling to 7% when it is currently at 7.1%
Despite the encouraging employment figures, commentators still believed that the base rate would remain low at least until the end of 2014. The new GDP figures, whilst only a preliminary set, could see the base rate rise reconsidered earlier.
Inflation has also fallen recently to 2%, the target figure set by the Treasury and this puts further pressure on the Bank of England to consider interest rates to cool down an economy that could overheat with rapidly rising house prices too.
The ONS GDP preliminary estimate can be seen in their Q4 2013 statistical bulletin.