Britain’s recovery remained on track in the third quarter but fresh figures revealed growth was heavily reliant on the consumer, leaving the government’s much hoped-for rebalancing of the economy elusive.
The second estimate of GDP between July and September confirmed a slight slowdown in the pace of growth, following a 0.9% increase in the second quarter, in line with expectations.
However, the data from the Office for National Statistics gave a more detailed breakdown of the various elements of the UK economy, and suggested that the government is not succeeding in its aim to rebalance it away from a reliance on the consumer sector and towards more exports, business investment, and industry.
Chris Williamson, chief economist at Markit, said: “Further confirmation of the UK’s recent impressive economic performance was provided by official data showing robust growth in the third quarter. However, the news was marred by a fall in business investment, which adds to signs that companies have become increasingly concerned about the economic outlook. Falling business investment once again leaves the economic upturn in the hands of the consumer.”
Industrial production grew by just 0.2%, revised down from an earlier estimate of 0.5% growth. It was dragged down by a fall in output in the mining utilities sectors, while the rise in manufacturing output was confirmed at 0.4%.
Exports fell by 0.4%, while imports increased by 1.4%, worsening Britain’s trade position. The UK’s trade deficit with the rest of the world widened to £11.2bn in the third quarter from £8.9bn in the second.
In 2012, the chancellor set a target of doubling UK exports to £1tn by 2020, a target which now looks out of reach according to the British Chambers of Commerce.
Business investment, which the government is banking on to drive a sustainable recovery, actually fell by 0.7% or £300m compared with the second quarter, despite City expectations of a rise.
Meanwhile household spending increased by 0.8% over the third quarter, extending the run of growth to 13 consecutive quarters.
Services sector output was revised up to 0.8% from an initial estimate of 0.7%, reinforcing the picture of a UK recovery reliant on the consumer.
A spokesman for the Treasury repeated its persistent line that growth in the third quarter was a sign the government’s long-term economic plan is working, and that the UK economy was under threat from factors abroad.
“The UK is not immune to weakness in the euro area and instability in global markets, so we face a critical moment for our economy. We need to carry on working through our economic plan that is securing a resilient economy and a better future.”
The annual rate of growth was unchanged at 3% in the third quarter.
guardian.co.uk © Guardian News and Media Limited 2010