UK still growing strongly

British consumers are still spending, not saving

The UK economy continued to grow at a respectable rate in 2000, with a revised growth rate of 3% for the third quarter of the year, slightly higher than the previous estimate.

The news could mean it is a little while longer before the Bank of England considers cutting interest rates.

"The UK economy is going through a very gentle slowdown. Given the savings ratio and household income, and the fact that the consumption side of the economy is holding up pretty well, I don't think rates have peaked," said Arjun Mittal of American Express Bank.

On Wednesday, it emerged that two members of the Bank of England's Monetary Policy Committee had voted for a rate cut in December, on the fears that a global economic slowdown could soon impact on the UK.

The main worry is in the US, where the buoyant growth rates earlier in the year seem to be going into reverse.

However, the stronger-than-expected UK economy could be good news for the Chancellor, who is already expecting a record budget surplus.

If the economy grows more than planned, there could be even larger tax receipts to swell his coffers in the run-up to an expected General Election in the spring.

Trade balance

Meanwhile, the UK balance of payments deficit got smaller in the third quarter.

The gap between imports and exports was reduced to £3.1bn in the three months between July and September, compared with £3.4bn in the previous three months.

That reflects the success of UK exporters despite the high pound, a success also reflected in the economic growth figures.

Manufacturing output rose by 0.7% in the third quarter, the same rate as in the previous quarter.

And the buoyant service sector is growing at a rate of 0.9% for the quarter, or 3.5% annually.

Manufacturing exports might receive a further boost soon as the pound is beginning to weaken against the euro, after reaching record highs earlier in the year.

A high pound makes British exports more expensive.

The euro has risen 11% from its low against the dollar in the past two months.