Britain’s economy is on course for the biggest leap forward since last year’s Olympics after figures today underlined gathering momentum behind the nation’s dominant services firms.
Services — accounting for more than three-quarters of the economy, and ranging from hotels and restaurants to finance and IT — grew 0.2 per cent in April. This picked up the pace from the previous month, pushing year-on-year growth to 2 per cent.
The upbeat figures completed a hat-trick of good news for the economy after consumer confidence reached its highest level for more than two years. House prices, meanwhile, are bubbling up at their quickest annual pace for nearly three years, according to Nationwide.
The improving fortunes of the services sector — pivotal in establishing a recovery — confirmed a strong start to the current quarter. Analysts and the Bank of England are pencilling in growth of 0.5 per cent, accelerating from the 0.3 per cent seen in the opening three months of 2013 and the fastest advance for the UK since London’s Olympics gave a fillip to growth last summer.
More up-to-date survey data has also shown signs of services firms continuing their recent roll, along with recovery signs from Britain’s manufacturers and builders. IHS Global Insight economist Howard Archer said: “There is a very real possibility that growth could be stronger still given that manufacturing output looks likely to have expanded in the second quarter while even the long-suffering construction sector could have eked out some growth.”
The latest signs of buoyant economic growth come on Bank of England Governor Sir Mervyn King’s last day in the job before Mark Carney takes over on Monday. Many experts believe the Canadian will push for a resumption of quantitative easing, although the better news means he may struggle to win over a majority of the monetary policy committee to more stimulus for now.
Chris Williamson, chief economist at financial data provider Markit, said: “Providing the data flow holds up well in June, it seems increasingly unlikely that the Bank of England’s policymakers will opt for further asset purchases at their meeting next week.”
In the year to April, the biggest contributions to growth came from government services, distribution, hotels and catering, and business services and finance.
The Office for National Statistics said “slow but generally steady growth” for services had brought the sector back to its pre-recession peak. The UK’s double-dip recession was revised away by the ONS this week but statisticians warned the slump was much deeper than first thought at 7.2 per cent.