UK Economy Avoids Triple-Dip Recession

The UK economy returned to meagre - but better than forecast - growth in the first quarter of 2013, averting the prospect of a triple-dip recession.

According to the first estimate of GDP by the Office for National Statistics (ONS) there was overall growth of 0.3% in the period - driven by the service sector though construction remained in the doldrums.

A contraction in GDP would have given the UK two consecutive quarters of negative output and plunged the UK back into recession, delivering a savage political blow to the Chancellor George Osborne.

GDP had shrunk by 0.3% in the final three months of 2012 but the ONS pointed today to a recovery in services output, with the motor industry particularly strong.

It measured growth in the sector at 0.6%, driven by 1.1% growth in the wholesale and retail distribution, hotels and restaurant trades sector.

Industrial output was lifted by the biggest rise in the mining and quarrying sector since 2002 as some North Sea oil and gas platforms came back on line after repairs that had depressed production in the final quarter of 2012.

The figures also showed that the impact of the cold winter was not as bad as feared, with weather-hit trading on the high street offset by a boost in energy demand as households ramped up their heating.

However, manufacturing output remained weak at -0.3% in the period while construction contracted by 2.5%.

Mr Osborne took to Twitter to give his reaction: "Today's figures are an encouraging sign the economy is healing. Despite a tough economic backdrop, we are making progress.

"The deficit is down by a third, businesses have created over a million and a quarter new jobs and interest rates are at record lows.

"We all know there are no easy answers to problems built up over many years, and I can't promise the road ahead will always be smooth but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future."

The performance will relieve some of the pressure on the Chancellor to rethink his austerity policy, following recent warnings that the UK is a "crisis economy" and last week's ratings downgrade.

IMF chief economist Olivier Blanchard told Sky News last week that Mr Osborne was "playing with fire" with his economic strategy.

Business reaction to the GDP figures was largely positive with the chief economist at the Institute of Directors, Graeme Leach, saying it was a crucial time for some some news.

He said: "Despite the squeeze on real earnings and the negative impact on confidence from the euro crisis, money supply growth has picked up and with more money sloshing around there has been more growth.

"We shouldn't get too excited about 0.3% quarterly growth but it does provide relief from all the doom and gloom."

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