Economic growth slows to 0.2%

'Special factors' blamed for slow growth

Britain's economy slowed between April and June after new figures today showed the UK grew by 0.2% in the quarter.

The figure is lower than the 0.5% seen in the first quarter, but the Office for National Statistics (ONS) said the figures this time were heavily influenced by one-off factors such as the royal wedding, Olympic ticket sales, record warm weather in April and the Japanese tsunami.

The ONS estimated the impact of these effects knocked as much as 0.5% off the GDP figure, which otherwise may have shown growth of 0.7%.

The performance will offer some relief to Chancellor George Osborne, who has come under pressure to amend his deficit reduction strategy amid concerns that a sluggish economy could affect tax revenues targets.

The Government's tax and spending watchdog had projected 0.4% for the second quarter, but many City economists reduced their GDP forecasts recently because of mixed manufacturing, services and construction figures.

Production output dropped by 1.4% in the three months but this was offset by a good performance in the powerhouse services sector, where output rose by 0.5%, and in construction where output rose by 0.5%.

Manufacturing declined by 0.3% quarter on quarter, a performance put down to the impact of the Japanese tsunami on supply chains. The warm weather also had an impact on gas and electricity demand.

Year on year the UK economy grew by 0.7%, which was the lowest rate of growth since the first quarter of 2010.

The Chancellor has faced calls recently to reverse the VAT increase which took effect in June, but said yesterday that low interest rates and the UK's credit status had justified his tough stance on the deficit.

Mr Osborne said today: "The positive news is that the British economy is continuing to grow and is creating jobs.

"And it is positive news too at a time of real international instability we are a safe haven in the storm.

"Our economy is stable at this time because this Government has taken the difficult decisions to get to grips with Britain's debts. Abandoning that now, as some argue we should, would only risk British jobs and growth."

The pound strengthened against the dollar following the update, breaking 1.64 US dollars for the first time since the middle of last month.

Howard Archer, chief UK economist at IHS Global Insight, said: "The GDP report is weak but not as bad as it could have been.

"While the worst fears were not realised, growth of just 0.2% in the second quarter after flat activity in the previous two quarters combined is hardly a performance to celebrate."

Business Secretary Vince Cable said: "I am not disappointed. We have had growth. It's not spectacular, but I am not surprised by that, when you see where we have come from.

"We are still living with the aftershocks of the banking crisis and the recession, living standards have clearly been squeezed by imported commodity prices, but we are getting growth and, more important, if you look at the trends over the last year, it is clear that we are now getting the building blocks for a more balanced and sustainable form of growth with business investment, exports and manufacturing."

Mr Cable dismissed Labour's claim that the Government needed 0.8% growth today to remain on track as "simply factually wrong".

And he rejected Labour's call for a plan B, saying: "The Government has made it very clear that we have got a very determined plan which we are sticking to to eliminate the structural deficit over the period of the parliament.

"There is no need for a plan B. We have to stick to the deficit reduction commitments."

Any additional stimulus to the economy would have to come through monetary policy, he said.





Shadow chancellor Ed Balls said last year's recovery had been "recklessly choked off" by Mr Osborne, and he urged the Chancellor to jump-start the economy by temporarily reversing January's VAT rise.

"At a time of global uncertainty, George Osborne's rash decision to hike up VAT in January and cut further and faster than any other major economy has caused confidence to fall and the economy to flatline since the autumn," he said.



"He ripped up the foundations of the house as the global economic hurricane was brewing - undermining our recovery well before the recent problems in the eurozone and America and leaving us dangerously exposed if things now go wrong there.



"Instead of clutching at excuses like too much snow in winter and too much sun in the spring, George Osborne needs to realise he only has himself to blame for the choices he made a year ago."

PA

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Supporting role: at the Supreme Court, Rhodes was accompanied by a famous friend, the actor Benedict Cumberbatch
booksPianist James Rhodes on the extraordinary legal battle to stop the injunction of his memoirs
Arts and Entertainment
Jesuthasan Antonythasan as Dheepan
filmDheepan, film review
Sport
Steven Gerrard scores for Liverpool
sport
News
Tattoo enthusiast Cammy Stewart poses for a portrait during the Great British Tattoo Show
In picturesThe Great British Tattoo Show
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?