GDP forecast boosts hopes for growth as the Bank sits on hands

The economic recovery is picking up speed, according to a respected economic think-tank.

The National Institute of Economic and Social Research estimates that the UK's GDP expanded by 0.8 per cent between February and April. That would represent a marked improvement on the 0.3 per cent growth that the Office for National Statistics (ONS) estimates Britain experienced in the first quarter of the year. And the forecast will bolster hopes that the economy, stagnant since late 2010, is finally going somewhere.

The Bank of England yesterday held its £375bn monetary stimulus programme on hold, in what City analysts said was likely to be a reflection of improvements in the economic data in recent weeks.

"Some signs of growth at the start of the year, together with some stabilisation of activity indicators in April, will have been regarded as positive," said Lee Hopley of the EEF manufacturers' organisation.

As well as the most recent GDP estimate from the ONS, which meant Britain managed to avoid a triple-dip recession, surveys of the construction, manufacturing and services sectors of late have suggested a brightening picture.

The ONS reported yesterday that the beleaguered manufacturing sector, which has been contracting since early 2011, grew by 1.1 per cent in March, although it was still down 0.3 per cent over the first quarter. Industrial production was up by 0.2 per cent over the same period, reflecting a bounce-back of North Sea oil extraction and meaning that the sector made a small contribution to positive GDP growth in the first quarter.

There were also some welcome signs of an upturn in inward investment. The Government's trade promotion body, UK Trade and Investment (UKTI), reported that Britain was host to 1,462 projects worth £766bn in 2012-13, a rise of 4 per cent on the previous year. UKTI said this fresh foreign investment created 58,170 new jobs.

Lord Green, the Trade and Investment minister, said: "The 2012 Olympics were a once-in-a-generation opportunity for the UK to showcase to the world Britain's compelling investment offer, and these preliminary figures are very encouraging. Despite strong competition from traditional competitors and emerging economies, Britain has retained its position as the leading destination for foreign direct investment in Europe."