UK GDP growth slows to 0.7 per cent

Emma Haslett
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Construction grew 0.8 per cent during the quarter, the ONS said (Source: Getty)

The UK's GDP growth fell to 0.7 per cent in the third quarter of 2014, figures released by the Office for National Statistics this morning showed.

The figure is slightly down from the second quarter's 0.9 per cent, although slower growth had been expected.

The construction sector led the charge, with growth of 0.8 per cent, while services grew 0.7 per cent and production output rose 0.5 per cent, and agriculture brought up the rear, with growth of 0.3 per cent.

It's worth pointing out that the figure is a preliminary estimate. Last month, the ONS revised up its original figure for the second quarter from 0.8 per cent.

Although the figure has fallen from the previous quarter, it still makes the UK one of the fastest-growing major economies in Europe. However, it does add to mounting evidence headwinds from Europe, where growth is more muted, are beginning to affect recovery in the UK.

The figure will add to conviction the Bank of England should delay a rise in interest rates. Recent economic data, including weaker-than-expected inflation of 1.2 per cent, has taken the pressure off the Bank to hike rates sooner rather than later, with a rise now expected in the middle of next year, rather than during the first few months.

Howard Archer, chief European and UK economist at IHS global insight, said growth was "unlikely to dilute belief the Bank of England will hold off from raising interest rates until around mid-2015".

The government will be fervently hoping that growth holds up well as the May 2015 general election draws ever nearer, and it will be particularly hoping that earnings growth picks up and inflation remains low so that an increasing number of voters feel that their living standards are improving.
But strong GDP growth may be a mixed blessing to David Cameron, who faces a €2.1bn (£1.57bn) one-off bill from the European Commission, thanks to the success of the UK's economy. The EC said the UK must increase its contribution to the bloc because it has performed better than other EU countries since 1995.
This morning Downing Street said it was planning to challenge the fee, with a source telling the FT it was "not acceptable".

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