GDP fall is less than feared

The UK economy shrank less than feared in the three months to the end of June, the Office of National Statistics has said. It contracted by only 0.4 per cent rather than the 0.5 per cent most recently forecast and the shock 0.7 per cent initially estimated.

The upward revision in growth was thanks to greater growth than first presumed in the construction and manufacturing sectors of the economy.

The Diamond Jubilee extra bank holiday weighed on growth but consumers and businesses making up for this lost productivity means that a return to positive growth in the third quarter is likely.

"We still expect a substantial rebound in quarter three, as the impact of the extra bank holiday unwinds. With a minor boost likely to come from hosting the Olympics, we should see growth more than offset any losses in quarter two," Nida Ali, economic adviser to the Ernst & Young Item Club said.