Figures show UK’s economy is growing

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Britain’s economy grew by 2.6 per cent in 2014 but the pace of expansion slowed more sharply than expected in the last three months of the year, official figures showed yesterday.

The annual figure is the best since 2007, before the recession, and indicates that the UK is likely to have been the world’s fastest growing major economy last year.

The dominant services sector, which represents more than three quarters of output, grew by 0.8 per cent.

Services are now 7.9 per cent ahead of their pre-downturn level at the start of 2008.

But gross domestic product (GDP) rose by just 0.5 per cent in the fourth quarter, the weakest level in a year, weighed down by a construction sector which shrunk at its worst pace for more than two years.

The growth figure for 2014 was widely expected, though falls short of the three per cent forecast last month by the independent Office for Budget Responsibility (OBR).

It beats 2013’s figure of 1.7 per cent and matches the 2.6 per cent recorded in 2007.

US growth figures are due to be published on Friday. The International Monetary Fund (IMF) estimates its growth at 2.4 per cent.

UK GDP is now 3.4 per cent higher than the pre-recession peak at the start of 2008, according to the ONS.

Chancellor George Osborne said: ‘The figures confirm that the recovery is on track and our plan is protecting Britain from the economic storm, with the fastest growth of any major economy in 2014.

‘But the international climate is getting worse, and with 100 days to go until the election now is not the time to abandon that plan and return Britain to economic chaos.’

Quarterly growth of 0.5 per cent has not been slower since the fourth quarter of 2013 when it was 0.4 per cent. Economists had expected it at 0.6 per cent. The disappointment is likely to further push back the likely timing of an interest rate rise, amid ultra-low inflation.

Growth was dragged down by construction, which contracted by 1.8 per cent - its worst slowdown since the second quarter of 2012.

Manufacturing grew by just 0.1 per cent, its worst performance since the start of 2013. But manufacturing remains 5.4 per cent behind while construction is lagging by 7.9 per cent.