This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.guardian.co.uk/business/2013/may/23/concerns-health-uk-economy-gdp-growth-ons

The article has changed 4 times. There is an RSS feed of changes available.

Version 0 Version 1
Concerns over underlying health of UK economy as 0.3% growth confirmed Concerns over underlying health of UK economy as 0.3% growth confirmed
(about 9 hours later)
Stockpiling by British businesses accounted for much of the growth in the UK economy in the first three months of the year, adding to concerns that its underlying health remains weak. Britain suffered one of the biggest falls in investment among the G8 last year, adding to concerns that UK businesses are losing competitiveness by refusing to spend on new equipment.
GDP growth was confirmed at 0.3% by the Office for National Statistics after inventories increased by 0.4%. According to an analysis by the House of Commons library, Britain invests a lower percentage of GDP than any other of the leading western industrial nations. The figures, obtained by Labour, show that while most G8 countries have increased investment as a proportion of national income since 2010, Britain suffered the biggest fall of any G8 country apart from Italy.
The ONS said business investment, a key indicator of the economy's wellbeing, fell 0.4% and consumer spending rose a meagre 0.1%. In France and Germany, capital investment has remained largely stable at 19.9% and 17.2% of GDP respectively. In Britain it fell 0.8 percentage points between 2010 and 2012, to 14.3% of GDP. The US, Japan, Canada, Italy and Russia have higher levels of capital investment than the UK.
The disappointing details showed that the UK avoided a triple-dip recession only after businesses replenished stocks run down in the latter half of 2012, rather than generating growth from a surge in the sales of goods and services. David Cameron hosts the G8 countries in County Fermanagh in July and is expected to stress the need for the world's leading economies to make greater efforts to generate growth.
The Treasury remains confident that the UK economy will rebalance away from the City and government spending as it recovers over the coming years, but the early signs are not hopeful. The Treasury's independent economic forecaster, the Office for Budget Responsibility, has pencilled in a strong rise in business investment next year in response to growing optimism that the UK recovery will be gathering strength in 2014. However, the OBR has been forecasting a bounce in business investment for each year of this parliament only to see its targets missed.
Separate figures showed that activity in the banking sector and a modest rise in government spending spurred the services industry to a 0.2% rise in March, which in turn accounted for the positive news in the GDP figures alongside inventories. Ed Balls, Labour's shadow chancellor, said: "Britain has a poor historical record on investing for the long term but things have got worse not better over the last three years. Since 2010 we've seen the biggest fall in investment as a share of national income of any G8 country other than Italy."
David Tinsley, UK economist at BNP Paribas, described the reliance on stockpiling as "unimpressive" while Capital Economics analyst Martin Beck said talk of rebalancing the economy looked "forlorn". "Alongside action now to ensure we have a strong and sustained recovery, we need long-term reforms to make our economy stronger, more balanced and better able to attract new investment and create skilled jobs for the future."
Chris Leslie, Labour's shadow financial secretary to the Treasury, said the figures "confirm that our flatlining economy is simply back to where it was six months ago". In March Labour published a report by former Institute of Directors boss Sir George Cox, who found businesses wanted the government to play a constructive part in fostering long-term investment.
He said: "This is now the slowest recovery for over 100 years with just 1.1% growth since the 2010 spending review compared to the 6% forecast at the time. On jobs, growth, living standards and the deficit, this government's economic policies have badly failed." Figures from the Office for National Statistics showed that business investment was a significant drag on growth in the first three months of the year. The ONS confirmed that Britain avoided a triple dip recession with growth of 0.3% in the first quarter, but a breakdown of the figures showed that investment dropped 0.4%, mainly offset by stockpiling by British businesses.
George Osborne is keen to move away from Britain's traditional dependence on the City and government spending as the chief drivers of economic activity. In the first two years of the government he focused on providing support for manufacturers and increasing the amount of credit available to firms for investment. A Treasury official said several surveys highlighted a nascent recovery in business confidence and activity leading to the expected increase in investment next year. "There are positive signs that activity is picking up across the economy."
However, lending has remained tight and a lack of consumer confidence has seen most businesses restrain their spending and investment plans. Difficulties exporting to the markets in the eurozone have also hit sales and discouraged investment. The chancellor, George Osborne, is keen to move away from Britain's traditional dependence on the City and government spending as the chief drivers of economic activity. In the first two years of the coalition he focused on providing support for manufacturers and increasing the amount of credit available to firms for investment.
Manufacturing has begun to show signs of life again after a poor 2012 and the construction industry, which has also dragged on economic growth, has contracted at a slower pace in recent months. However, separate ONS figures showed that a 0.2% increase in activity across the services sector in March relied heavily on a buoyant banking sector and a modest rise in government spending.
Beck said the strong showing by the services sector in March, which was the third consecutive monthly rise, should provide a springboard for growth in the second quarter. David Tinsley, UK economist at BNP Paribas, described the reliance on stockpiling as "unimpressive". Capital Economics analyst Martin Beck said talk of rebalancing the economy looked "forlorn".
"But with employment and average earnings both dropping in the first three months on their level in the previous quarter, the foundations for a sustained recovery, even one driven by consumers, still look pretty rickety," he said.