Economic growth slumps to lowest rate since 1992

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Economic growth in the UK last year slumped to its lowest rate since 1992, official figures showed today.

Gross Domestic Product (GDP) was just 1.8 per cent higher in 2005 than the previous year, according to preliminary figures from the Office for National Statistics (ONS).

The growth rate was marginally better than the 1.7 per cent forecast by many City economists but well below the 3 per cent to 3.5 per cent Chancellor Gordon Brown predicted in his budget early last year.

The Chancellor was forced to scale back his forecast to 1.75 per cent in the pre-budget report to Parliament in December.

The 1.8 per cent rate of annual growth came after a hike of 0.6 per cent in the last three months of 2005, up from 0.4 per cent in the third quarter.

But the fourth quarter rally was not enough to stop annual GDP growth falling to its lowest level in more than a decade, and almost half the 3.2 per cent rate reached in 2004. In 1992 growth was just 0.3 per cent.

The fourth quarter was boosted by a 1.3 per cent rise in mining and quarrying and a 0.9 per cent increase in services. The service sector represents about 73 per cent of the UK economy and rose 2.6 per cent over 2005 as a whole.

The ONS said a 0.8 per cent decline in manufacturing in the fourth quarter saw industrial production fall by 0.6 per cent at the end of the year. Industrial production accounts for 20 per cent of the economy and fell 1.5 per cent over the whole of 2005, compared with a 0.7 per cent rise in 2004.

The worst hit manufacturers in the fourth quarter were in the transport equipment industries and the paper, printing and publishing industries.

But there was better news for mining and quarrying, which is estimated to have risen by 1.3% in the last three months of the year.