LONDON – The British economy grew at its fastest quarterly rate in over three years, official figures showed Friday, in perhaps the clearest sign yet that the recovery is becoming more self-sustaining.
The Office for National Statistics said Europe’s third-largest economy expanded by 0.8 per cent in the three months ended Sept. 30 from the previous three-month period.
That was slightly up from the 0.7 per cent recorded in the previous quarter but in line with expectations. The quarterly increase, which equates to an annualized rate of growth of a little more than 3.3 per cent, was the highest since the second quarter of 2010.
The figures also showed that output increased in all major groupings, such as manufacturing, the services sector and construction, which showed the highest gain at 2.5 per cent.
“Britain is booming again with the economy showing the most sustainable and robust-looking upturn since the financial crisis,” said Chris Williamson, the chief economist at Markit.
Treasury chief George Osborne said via Twitter that the figures were evidence that the economy was on the mend. “This shows that Britain’s hard work is paying off & the country is on the path to prosperity,” he wrote.
The news comes as many economists are beginning to worry that the U.K. economy is starting to show some of the symptoms that have caused it problems in the past. The main concern is centred on the housing market.
Over recent months, house prices have accelerated, particularly in the southeast and London, fuelling worries that another boom is on the cards that will eventually require the Bank of England to increase interest rates.
“If the recovery only flows to the better off residents of London and the South East then today’s news will make little difference to most people,” said Frances O’Grady, general secretary of the Trades Union Congress, the umbrella movement for the country’s union movement.
With millions of Britons hoping for their own home sweet home following the recession, many experts worry that gains in the property market aren’t sustainable.
Neil Mellor, a senior analyst at BNY Mellon in London, said low interest rates may be stimulating credit growth that could inflate the housing bubble once more, particularly in London.
“You know what it says in the dictionary,” he said. “If you look up boom it says: See bust.”
The Bank of England seems less concerned at the moment. Policymakers believe the revival in the housing market is “likely to provide a fillip to both dwellings investment and consumer spending,” according to the minutes from the last meeting of the Monetary Policy Committee, released this week.
The coalition government that was formed after the 2010 general election has made deficit-reduction its primary focus, but austerity measures have weighed on economic activity. With the next election expected in May 2015, the push is now on to get things moving again.
The housing initiative, launched by Osborne earlier this year, is meant to help buoy the British economy, which had largely flat-lined during his first three years in office despite record low interest rates and a stimulus program from the Bank of England.
The British economy has expanded for three consecutive quarters after narrowly missing falling into recession for a second time since the 2008 financial crisis. Even so, it’s still around 2.5 per cent smaller than before its peak of the first quarter of 2008.