UK economy sees 0.7% second quarter growth

high street

The Office for National Statistics (ONS) said the growth meant that GDP (gross domestic product) per head was now back to its pre-crisis peak in 2008.

The performance was driven by growth in the dominant service sector – supported by higher wage growth among consumers and low inflation.

There was no revision to first quarter output of 0.4%, with the UK economy growing in line with economists’ forecasts of 2.6% on an annual basis.

A 1 per cent leap in second quarter industrial production – the biggest since 2010 – was down to a surge in oil and gas production, the ONS said.

It measured a 7.8 per cent rise in extraction, which it believed was a result of Government tax cuts to support the industry amid falling prices and rising costs.

The increase in North Sea output was the largest since 1989, the ONS said.

However there were some fallers in the figures as factory output fell 0.3 per cent as weak demand in Europe hit export orders and agriculture shrank by 0.7 cent while construction was flat on the previous quarter.

ONS chief economist Joe Grice said: “After a slowdown in the first quarter of 2015, overall GDP growth has returned to that typical of the previous two years.”

“The industry sources tell us that may have something to do with the aftermath of the Budget and some of the tax changes then.

“Certainly, an enormous increase in North Sea oil production. Whether that’s sustainable or not that’s another question.

“If you take out the North Sea effect, growth would have been about 0.5 per cent.”

Anna Leach, CBI Head of Economic Analysis, said: “As we expected, growth in the UK economy is back on track once again following the loss of momentum over the first quarter.

“We should see similarly decent growth through the rest of the year as low oil prices and inflation help drive consumer spending and business activity outside the oil sector.

“But performance is mixed across sectors, with UK manufacturers going through a tough time as the stronger Pound hits sales into the Eurozone. Meanwhile, the Eurozone is still grappling with uncertainty over the Greek bailout.”

The Chancellor George Osborne urged caution while giving his reaction.

He said: “These figures today show Britain is motoring ahead with our economy producing as much per person as ever before.

“But there are clear risks out there in the world economy from the eurozone to what’s happening in the world’s stock markets, and so it’s vital that we stay on the road that we’ve set out on.”

Commenting on figures, Ben Dowd, O2’s Business Director, said: “Growth is good news for business confidence and consumer spending. But let’s not get carried away. We still face rising unemployment and poor productivity levels – worse than any of our G7 counterparts. If we don’t tackle both of these things together, how can we sustain economic prosperity? The Government and Bank of England have set out their longer terms plans to boost productivity– now it’s time for businesses to step up to the plate.